Chainlink

What is Chainlink?

  • Chainlink is the industry standard for building, accessing and selling oracle services needed to power hybrid smart contracts on any blockchain.

  • Chainlink oracle networks provide smart contracts with a way to reliably connect to any external API and leverage secure off-chain computations for enabling feature-rich applications.

  • Chainlink currently secures tens of billions of dollars across DeFi, insurance, gaming, and other major industries, and offers global enterprises and leading data providers a universal gateway to all blockchains.

It allows transfer of data from off chain sources to on chain sources, It allows smart contracts to access real world data that exist out of blockchain in a secure manner.

  • Chainlink’s oracle network creates a trustless bridge between blockchains and off-chain data sources, providing a viable solution to the Oracle Problem.

  • Chainlink is blockchain-agnostic and has networks running on various Ethereum L2s, including Arbitrum and Optimism, in addition to Polygon, Binance, Solana, and Avalanche (among others).

  • Chainlink is time-tested, having already secured multiple billions of dollars across top DeFi protocols. Despite its success, there remains incredible room for growth in the oracle-blockchain business as cryptocurrency remains a niche asset class compared to traditional markets.

  • Chainlink continues to innovate and remain competitive in a fast-moving industry, as evidenced by the Chainlink 2.0 whitepaper released in 2021. In addition to refining its staking mechanism, Chainlink has released a suite of new features and services, such as Verifiable Random Functions (VRFs), Off-chain Reporting (OCF), Keepers, and even its new Cross-Chain Interoperability Protocol (CCIP), which features a cross-chain message relaying service, and as a cross-chain token bridge.

  • Chainlink was a first mover in the decentralized oracle network space and has emerged as the dominant player in the oracles landscape. At its peak during the 2021 bull market, Chainlink secured over a total of $70 billion worth of value across DeFi networks.

  • As smart contracting technology penetrates legacy systems, Chainlink may benefit from increased adoption and the potential growth of the crypto industry and DeFi usage as a whole.

  • Chainlink pushes the boundaries on what DeFi dapps are capable of and is crucially important for DeFi writ large. The attack vectors become more complex with new projects and unique data added every year.

  • Chainlink’s oracle network is still quite limited (~332 nodes) relative to a blockchain like Ethereum (with 1,000’s of nodes) and could benefit from increased redundancy and security should it be further decentralized.

  • Despite the network’s inarguable success, the token (LINK) has drastically underperformed others successful projects like ETH.

Architecture:

  • Step 1: Client smart contract is called by a transaction to execute a function, whose implementation requires external data. It prepares a request using a Job ID that has been acquired a prior, plus the parameter values it wants to use for the Job execution.

  • Step 2 : Transfer LINK tokens in the oracle smart contract along with the job id to fulfill their request to the chainlink node.

  • Step 3: The Chainlink node that had the Job ID deployed on it realizes it’s the responsible party for the request. It combines the Job Specification corresponding to the Job ID, with the parameters contained in the event, to form the execution context for the job.

  • Step 5: After having acquired the desired data, the Chainlink node submits a transaction to the Oracle contract, signaling the fulfillment of the Job request.

  • Step 6: The Oracle contract uses the request ID to look up the corresponding requestor, and calls back the requestor contract with the Oracle result data.

At this point, the client smart contract has successfully gotten hold of the data from the outside world and proceeds to process the original transaction request by the client application.

Primary Use Case

Chainlink is a chain-agnostic and API-agnostic decentralized oracle network initially built on Ethereum. Chainlink is designed to connect off-chain data sources such as financial market data to on-chain smart contracts. “Oracles'' can be thought of as the bridge on which on-chain smart contracts access, retrieve, and verify data originating outside of a blockchain. They also relay data and instructions from smart contracts to other off-chain systems.

Chainlink’s primary use case is bringing trust-minimized and secure third-party data via its secure middleware solution without interfering with the blockchain’s consensus. Therefore, Chainlink is a highly secure and flexible oracle network interfacing with the legacy world and its real-world data. Chainlink also offers a blockchain abstraction layer for enterprise use, which allows enterprises that want to become blockchain-enabled to integrate with Chainlink for access to many blockchain networks with only one integration.

Future Use Case

Decentralized oracle solutions like Chainlink are still very new, experimental solutions to trusted third-party data providers. Legacy systems and enterprise companies still use centralized API data systems they trust. Before switching to a decentralized solution, the user experience must prove superior to legacy solutions. Most people and companies are resistant to change, and asking a global company to invest the time, money, and effort into learning about and adopting a new middleware solution has to be presented with significant cost savings or downside risk mitigation.

Competitive Advantage

Chainlink launched in 2019 and has since broken out to become the industry leader and standard for decentralized oracle networks. The project has amassed over 100 different integrations and is critical in the billion-dollar DeFi ecosystem, having secured over $65 billion in Total Value Secured (TVS) in DeFi. As of Q3 2022, Chainlink secures over 51% of the value secured across all oracles in DeFi, with over 1000+ Chainlink price feeds operating across several blockchain networks.

Major DeFi projects like Kyber Network, AVA, Graph Protocol, Synthetix, and Frax Finance are utilizing Chainlink’s oracles, largely because Chainlink remains open-source and blockchain agnostic. While most applications are currently built on Ethereum, Chainlink oracles can be used by other chains as seen by the recent announcement of Binance’s intent to use Chainlink with its Binance Smart Chain blockchain. In comparison, Maker is the second largest Oracle by TVL.

To be fair, Chainlink oracles actually don’t offer a ‘perfect’ solution to the assets-secured program, with the LINK token market map smaller than assets secured–but the game theory around this is that a specific validator can’t find an opportunity to manipulate prices in an economically viable way.​

Scaling and Privacy

In the future, Chainlink plans to increase privacy and scaling by implementing Trusted Execution Environments (TEE) for private off-chain computation. While TEEs do alter the amount of trust involved in the system, they allow for less computation on the base layer and enable more performance in a guarded sandbox. Additionally, Chainlink is looking to enable Threshold Signatures (TS) which will allow for batching requests into chunks, thereby reducing costs and computational load. Because both of these implementations are done off-chain, greater levels of data privacy can be obtained, although not guaranteed.

Economics:

ICO

In September 2017, Chainlink held its Initial Coin Offering (ICO) with a $32 million hard cap. The ICO originally offered LINK at $0.09 per coin with a 20% bonus, depending on how early the purchaser invested. The following public sale sold LINK at $0.11 per token. In all, both sales distributed 350 million LINK to the public. 1 billion LINK in total were initially issued. The token distribution was as follows:

  • 35% allocated to the token sales investors

  • 35% reserved for node operators and ecosystem rewards to incentivize network participants

  • 30% allocated to SmartContract.com, Chainlink’s parent company

In May 2019, Chainlink went live on the Ethereum blockchain and with it came its own ERC-677 utility token, LINK. An ERC-677 token is a token whose functionality is based on the ERC-20 token standard, but also has ‘transfer and call’ functionality.

Token Distribution:

As of Q3 2022, 47% of supply is circulating across 550k+ total wallets. 35% is controlled by the node operator’s incentive fund, 25% is held by the team for development, and ~16% is held in exchanges. No wallet outside of teams, nodes, or exchanges holds over 1% of funds.

The proportion of LINK “whale” addresses (owning more than 1% of supply) has been slowly decreasing over time. In 2018, whales owned ~70% of the supply and as of 2022 now own just ~55%.

Current Price: $7.73

Max Supply: 1,000,000,000 (1 Billion)

Circulating Supply: 491,599,971 (491.5 Million)

Market Cap: $3,807,900,208

Link : https://www.coingecko.com/en/coins/chainlink/tokenomics

Roadmap of nodes (Year when it started, next steps)

Mainnet Launch

Date - May 2019

Type - Mainnet Launch

Chainlink launched its first decentralized oracle network on the Ethereum mainnet following three successful security audits.

Price Feeds Launch

Date - TBC

Type - Network Integration

Chainlink Price Feeds launched to provide the smart contract ecosystem access to tamper-proof financial market data, enabling the creation of a wide range of DeFi applications.

Off-Chain Reporting (OCR) Launch

Date - February 2021

Type - Network Integration

After a year of development and security audits, Chainlink Off-Chain Reporting (OCR) officially launched on mainnet, marking a major milestone in the scalability of Chainlink's decentralized oracle networks.

2.0 Whitepaper

Date - April 2021

Type - Project Operations

The Chainlink 2.0 whitepaper was released, outlining a foundation for hybrid smart contract adoption via off-chain computation and a decentralized metalayer.

Verifiable Random Function (VRF) Launch

Date - May 2021

Type - Network Integration

Chainlink Verifiable Random Function (VRF) utilizes verifiable random functions to generate randonmness that is verifiable on-chain.

Check early access

OCTOBER 3 2022

Community members can check if they are eligible for early access.

To see if you qualify for early access to Chainlink Staking v0.1, check your eligibility in the app.

Early access opens

DECEMBER 2022

Those qualifying for early access have the opportunity to stake LINK.

The early access phase of Chainlink Staking v0.1 is a period at launch where eligible community members on the Early Access Eligibility List have the opportunity to stake LINK before the Chainlink Staking Pool is opened to the public.

General access opens

DECEMBER 2022

Others can stake LINK until the initial Chainlink Staking v0.1 Pool is filled.

The Chainlink Staking v0.1 Pool opens to everyone after early access opens.

Performance Analysis:

In Q2 2022, Chainlink grew to support:

1000+ decentralized oracle networks

Powering 1350+ projects across 12+ blockchains & layer 2s

Key milestones:

📶 3B+ data points

⛓️ 185M+ on-chain calls

🎲 7M+ randomness requests

Last updated