Chainlink is essentially a decentralized ecosystem that provides data from the real world to the siloed world of blockchains. Chainlink’s token is called LINK and is used to compensate oracles for their work in finding accurate data at the request of smart contracts in Chainlink’s ecosystem.
The Chainlink ecosystem
Chainlink does not have its own native blockchain. As an ERC-677 token, Chainlink’s cryptocurrency, LINK, runs on the Ethereum blockchain. Chainlink is an economy of oracles (sometimes called nodes) that compile outside data and turn that information into something a blockchain can then act on, given the fact that blockchains do not speak the same language as the outside world.
An oracle is essentially a computer program based outside of a blockchain that gathers data from sources, such as price information from crypto exchanges, and converts that data into something that blockchain-based smart contracts can read. It then sends that information to specific blockchain-based smart contracts. Those smart contracts can then complete their programmed actions based on the results of the data sent by oracles.
Chainlink takes this oracle concept and adds decentralization, credibility and capitalism. Chainlink’s system is compatible with multiple blockchains.
Smart contracts are blockchain-based addresses programmed to autonomously complete certain actions when triggered by an outside factor. Smart contracts, however, are siloed to the blockchains on which they are coded, in terms of receiving usable data from external sources.
Chainlink utilizes a system of multiple smart contracts that essentially request and validate data from Chainlink’s ecosystem of external oracles. These oracles each look to multiple external data sources to pull the information requested by the smart contracts.
Chainlink’s smart contract system then evaluates that data from multiple oracles, checking for accuracy. If the information is accurate, the oracles are paid LINK as a reward. Some smart contracts may also necessitate that the oracles they utilize hold a certain minimum number of LINK tokens to cover any penalties incurred.
For Chainlink, price also comes into play, as LINK is a token used for trading on cryptocurrency exchanges. With Chainlink, price today — the LINK price today — can be seen in the live price at the top of this page, which shows Chainlink to USD value (LINK to USD live). Historical LINK price action is also available on the Chainlink price chart.