The Complete History of Chainlink (LINK)
Chainlink is a unique network: unlike many other blockchains that represent an enclosed system using its own internal data, Chainlink’s purpose is to serve as a bridge between the real world and blockchains. It’s a decentralized oracles network that can provide data from external software data sources, acting as a layer that gathers information and authenticates it. What are the use cases for this data? For example, if a smart contract needs to take outside temperature into account it can’t take it automatically from an off-chain source, it can’t download it from a weather forecast site, because it means relying on a third party. Originally the idea stemmed from the previous project of its parent company, SmartContract.com, which tried to develop an oracle solution for blockchains, but it had one flaw - it was centralized. A centralized oracle can’t be trusted because if it provides false data, it gets written to the blockchain and stays there forever. Chainlink’s development started to solve this problem.
The Variety of Use Cases
How can all these decentralized oracles be used in real blockchain-based applications? The problem of all blockchains is the input of external data, while it can be necessary to use in many types of smarts contracts. Oracles request this data from various sources and feed it to smart contracts. Chainlink solves the trust problem by having many nodes that check the reliability of the source and get rewarded for it with LINK tokens. Data can be taken from any source that has an API, thus Chainlink’s oracles can be used in any area.
That’s the dominant use case for oracles and Chainlink today. It includes both DeFi and traditional finances that get linked together more and more over the years. By January 1, 2021, the market size of DeFi has increased to $15.6 billion. Oracles are crucial for the functioning of DeFI, because many DeFi applications have to check off-chain sources and somehow get the information about prices of assets, their volumes and capitalization. Oracles can be used to build decentralized exchanges, also they are important for minting stablecoins. Stablecoins’ price usually depends on some external asset such as the US dollar or Japanese Yen or even Bitcoin, thus their network has to constantly check the price of the underlying asset and make adjustments by creating new tokens or destroying old ones to keep the value stable.
Another use case is decentralized loans. Decentralized loans also need oracles because their main scheme of work requires people to pledge their assets for getting money. For example, if someone needs to take a decentralized loan and receive USDT, they can lock their BTC coins in a loan platform’s smart contract and get their loan in exchange. After that the contract has to check the price of the pledged assets to be able to sell them if their price moves below the predetermined margin. That can be done with the aid of oracles which provide information about the price of all necessary assets. However, there are some crypto loan platforms that don’t work in a decentralized way thus they can provide loans not only in crypto but also in fiat currencies. One of such platforms is CoinLoan. A person can deposit their coins there and get a stable interest on them or take a loan with affordable rates.
The third type of application of oracles in the DeFi industry is insurance. Insurance is a giant business globally - its size is $5.3 trillion worldwide. Decentralized insurance will become a fine addition to the variety of insurance products across the globe - and more and more people will buy it. No need to mention that this whole concept doesn’t work without getting information from the outside world.
Sports and Betting
Betting and gambling are two very old forms of entertainment. They have existed since the beginning of human history, and they still thrive, evolving over time, taking new forms but staying the same internally. To implement betting in decentralized systems it’s necessary to receive information from the outside world about the outcome of sports events to distribute rewards. We can even go as far as to say that it’s nearly impossible to build a sports betting platform without oracles. Of course, every piece of information needs to be checked before writing it to the blockchain but that’s what nodes of every oracle platform such as Chainlink exist for.
And the last but not the worst application of oracles is the energy sector. Over the past years, the P2P sector has advanced greatly and now it allows trading renewable energy between individuals using oracles to measure the amounts of available energy, check current prices and display the current state of trade. Chainlink also can be used for this purpose because its oracles can be connected to anything that has an appropriate API.
The Future of Chainlink
With everything said above it’s clear that the need for decentralized oracles in the modern world where blockchain systems start to play a bigger role is going to increase significantly. Chainlink is pretty popular in the crypto community, it stays in the top 10, and it’s already better than many other blockchain projects, considering that they have had a working product since their launch in June 2019. No doubt that the ecosystem of Chainlink will continue to develop. If you have any LINK tokens stored in your wallet, you can also put them to work and deposit them to CoinLoan. You’ll be able to receive interest on your coins or take loans backed by your LINK tokens. The crypto community believes in the potential of Chainlink - thus we also believe in it.