Transparency, immutability, and decentralization are the fundamental pillars of wealth generation for blockchain systems, but what about information? Is there a reliable, objective, and decentralized source of data that can be fed into the blockchain?
How can you know what is going on in other nations, such as the United States, Korea, Japan, and China, if you reside in Vietnam? We can connect, receive, and transmit information with countries outside of Vietnam thanks to communication, information, media, and the internet. If Vietnam is unable to contact with and obtain information from other external sources, the blockchain world is the same; it is a closed, automated world that runs according to the rules established at the outset. If there is no connectivity to the outside world, how can we trade and develop with the rest of the world? Blockchain will always remain a lonely, inflexible, and closed society.
In real life, if you want to provide or verify information, there will be companies providing services for you, if you want to read newspapers, you can go to BBC, Forbes to read, want to know how much bitcoin is today. You can go to the Binance exchange to see.
But with the blockchain world, it’s an autonomous and decentralized place, if you centrally feed information from real-life companies into the blockchain, it breaks the very nature of that world.
The solution is that we need a god, put the most objective and accurate prophecies into the blockchain, so that the intersection between the real world and blockchain becomes more seamless, and that’s it. is Chainlink which provides information in a decentralized way for most current blockchain platforms.
Chainlink is a decentralized Oracle network. It aims to act as middleware between smart contracts and external data sources, allowing smart contracts to securely access an off-chain data feed.
On blockchain platforms that have DeFi projects and for example the Aave application is a lending protocol that is the first to leverage real-life crypto asset valuations to calculate loan interest rates using a Decentralized price network. Decentralized price network means an average price from the market that is not distorted by any centralized organization.
So it makes no sense for a decentralized project to use a single source of information from a centralized provider.
To solve this problem, we need a transparent god, where this god will prophesy an information that is honest, accurate, decentralized, does not distort the truth, and that god is Chainlink.
If Bitcoin has proof-of-work, Cardano has proof-of-stake, then Chainlink has tamper-proof network
Since Chainlink is open source and decentralized, it incentivizes a large number of users to operate nodes on the network and rewards them in the form of LINK tokens.
To operate a node, users can purchase an amount of LINK to deposit with the network, from which node operators allow the oracle network to provide information such as price data to blockchains.
The principle of operation is that the nodes will receive commands from the network and provide different types of specific information such as: market data, weather, sports data, APIs, etc. And when the nodes bring back the desired data want, they report back to the Chainlink aggregation contract to compare responses. Chainlink will select the most accurate information by averaging the answers.
For example: Company A made a contract to sell goods to company B and the two companies created 1 Smart Contract. In particular, it is stipulated that company B will pay company A when receiving the goods.
When Company B receives the goods, it will digitally sign the API that they have received the goods.
This is the input data that will trigger the Smart Contract to make the output as a payment from company B’s bank account to company A’s bank account.
The current price of LINK is 29$
- Source: ThuanCapital, Coin98, Coindesk -