What is Chainlink (LINK)?

Chainlink is a decentralized oracle network designed to expand the functionality and reliability of blockchain smart contracts by providing them with real-world data and off-chain computations.

Chainlink’s native cryptocurrency, LINK, is classified as an infrastructure token. These types of projects focus on enhancing the functionality, efficiency, and security of blockchains and their applications (dApps).

More specifically, Chainlink falls under the oracle token category and specifically seeks to expand the utility of smart contracts by allowing them to pull real-world data. This can include weather information or professional sport match results. This is particularly useful for decentralized finance (DeFi) protocols, NFTs, and play-to-earn games (GameFi), among others.

LINK is the native cryptocurrency of the Chainlink network. LINK can be used to pay for services associated with the Chainlink network, earn rewards for helping to secure the network via staking and participate in the governance process that determines the strategic development of Chainlink.

Kraken offers LINK, as well as 250+ other types of cryptocurrencies.

Chainlink helps decentralized networks scale by enabling cross-chain communications and providing external data to smart contracts.

The main components Chainlink uses to achieve this are:

Data Feeds: Chainlink’s data feeds bring various types of real-world data onto blockchain networks in real-time. Data feeds can reliably bring different types of non-blockchain based information such as commodity prices, weather, sporting event outcomes and more on-chain. These data points can then be used across a variety of decentralized applications for whatever purpose may be needed.

CCIP (Cross-Chain Interoperability Protocol): While oracles facilitate communication between blockchains and external data feeds, CCIP enables blockchains to communicate with one another. For example, CCIP can be used to transfer assets and other information between multiple blockchains, thereby serving as the communication layer for cross-chain dApps. 

Data Streams: Chainlink’s data streams are similar in concept to its data feeds, but are optimized for low-latency streaming of data such as high-frequency asset prices and payment fee feeds. Additionally, data streams use two sets of oracles: one to retrieve the data off-chain, and one to verify the data on-chain.

Functions: Chainlink functions allow blockchain-based smart contracts to receive real-time data from Chainlink oracles, saving smart contract developers the need to manage their own Chainlink node.

Automation: Chainlink automation services enables faster scaling of smart contract-based services through automated integration with Chainlink’s oracle network. This allows for continuous communication with the fastest data streams offered by Chainlink, along with Chainlink’s robust security.

VRF (Verifiable Random Function): Chainlink VRF provides randomly generated values to add randomness to smart contract functionality. Such randomness is important for certain use cases including various games and randomly assigned tasks.

Chainlink’s oracles provide real-world data to smart contracts that would otherwise be inaccessible. Chainlink plays an important role in the crypto ecosystem by allowing blockchains to integrate with and scale across external networks and applications.

By allowing blockchain applications to utilize data from non-blockchain sources, Chainlink opens new possibilities for decentralized application developers. Using Chainlink, developers can create a broader range of applications such as prediction markets, lending and insurance protocols.

Chainlink was created with the aim to solve “The Oracle Problem” — a fundamental issue plaguing smart contracts and dApps. 

Blockchains are inherently self-contained systems, unable to directly access data from the outside world. This isolation limits the potential of smart contracts, which often rely on real-world data to function properly. 

Thanks to its oracle network, Chainlink allows independent blockchain node operators to retrieve and verify data from various sources, including APIs, data feeds, and other off-chain resources. This data is then aggregated and delivered to smart contracts on blockchain networks.

Thanks to this system, insurance platforms can use Chainlink to trigger payouts based on real-world events like weather data or flight cancellations, supply chain management applications can track the movement of goods in real time, and gaming platforms can incorporate provably fair randomness. These are just a few examples of the use cases oracle networks bring to the blockchain. 

The Chainlink network incentivizes node operators with LINK for providing the data to smart contracts and ensuring the integrity and accuracy of the information. This also helps guarantee the node’s honesty and cooperation needed to allow Chainlink to operate.

LINK holders can also stake their LINK tokens to contribute to the network’s security and earn LINK-denominated rewards. This helps maintain security while enabling blockchains to scale.

Chainlink Core plays a central role in this process, acting as the API backend that communicates with the node operators and client contracts on the Ethereum network. This ensures the smooth and secure flow of data between the real world and the blockchain, empowering smart contracts with the information they need to function effectively.

Someone may wish to purchase LINK for the following reasons:

• Participate in protocol governance: LINK is used to empower the community to actively participate in the decision-making process of its protocols, ensuring a more democratic and inclusive approach to project management. 

• Stake LINK: staking allows LINK owners to earn potential rewards by actively participating in the validation of transactions on a blockchain network. 

• Become a node operator on the Chainlink network: In a blockchain, nodes, which are individuals or entities running client software, collectively manage the network's operations and validate transactions.

LINK token holders can use the token in several ways within the Chainlink ecosystem:

• Pay for oracle services: Compensate node operators for retrieving and delivering data to smart contracts. This includes payment for various data feeds, APIs, and other oracle services.

• Stake for network security: Holders can stake their tokens to participate in securing the Chainlink network.

• Reward accurate data providers: Used to incentivize node operators to provide accurate and timely data. This helps ensure the reliability and integrity of the information used by smart contracts.

• Participate in governance: Some Chainlink-based projects may use LINK for governance purposes, allowing token holders to vote on proposals and influence the direction of the project.

Chainlink was founded in 2017 in the Cayman Islands by Sergey Nazarov and Steve Ellis.

• Title: Co-founder of Chainlink Labs

• Professional Background/Qualifications: Sergey has worked in the crypto space since 2011. Before co-founding SmartContract (now known as Chainlink Labs) in 2014, he was a General Partner at QED Capital and the CEO of CrytaMail and Secure Asset Exchange. 

• Key Contributions: Sergey co-authored the Chainlink whitepaper with fellow co-founder Steve Ellis in 2017. He proposes that the infrastructure created by Chainlink could potentially deliver significant value to society as a whole, possibly evolving into a "public good" comparable to a federal postal service or an interstate system.

• Title: Co-founder and CTO of Chainlink Labs

• Professional Background/Qualifications: Prior to co-founding Chainlink, Ellis also co-founded Secure Asset Exchange with Nazarov in 2014 and served as its Chief Technology Officer until 2016.

• Key Contributions: In addition to co-authoring the Chainlink whitepaper, Ellis serves as Chainlink’s Chief Technical Officer (CTO).

The Chainlink team has raised funds from outside investors to fund the launch and development of the platform. 

On September 19, 2001, a private sale raised $29 million by selling LINK at approximately $0.09 per coin to unknown investors. Also on September 19, 2017 a public sale raised $3 million at ~$0.11/LINK from the public. These two sales were each part of Chainlink’s initial coin offering, where they sold 350,000,000 tokens for a total of $32 million (~$0.09143/LINK).

LINK has a maximum supply limit of 1,000,000,000 tokens.

350,000,000 LINK tokens were released into circulation immediately during the public and private token sales, while the remaining 65% of the total supply is subject to a variable emission rate.

The total emissions rate depends on how much LINK is distributed to stakers and the company over time. Currently, about 70,000,000 LINK is expected to be released into circulation each year. If this rate continues, LINK would reach its maximum supply limit by Q1 2030 (1,000,000,000 LINK tokens in circulation). 

Chainlink employs a deflationary mechanism to manage its token's supply over time. As LINK is burned to pay for oracle services, the overall supply gradually decreases. While new LINK is minted as rewards for node operators, the burn rate is intended to outpace the minting rate, creating a deflationary pressure on the token's supply.

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