What Is Chainlink & How Does it Work?

Ever since cryptocurrency became famous, we have all known it mainly for the same reason: that it bridges the gap between traditional and digital finance. There’s no doubt that every cryptocurrency serves this purpose only. However, each of them has different features that make them unique and valuable in their own way.

Chainlink is also a cryptocurrency platform that distinguishes itself with its special features. 

In this blog post, we will discuss these features in detail and explain how Chainlink works to provide you with a better understanding of them. 

Chainlink: The Foundation for Onchain Finance

Chainlink is slightly different from other blockchain projects. It is a cryptocurrency project where computers on a blockchain network can easily access real-world information. In this way, it connects the digital world with our traditional world and enables smart contracts to double-check their data from external sources. 

It is serving as an important tool that is bringing the benefits of the digital world technology to the real world. This type of system is designed to offer a more secure and verified environment by linking smart contracts to external data sources.

The concept of this integrated architecture was put forward in 2017 and ever since that time, it has been one of the most effective ideas.

How Chainlink Works?

The biggest drawback of blockchain technology is that it has limited data sources. Chainlink aims to solve this issue of data limitation by providing data from the real world. It functions as a connecting platform for digital and real-world data resources.

1. The Role of Oracles in Blockchain

To understand the workings of Chainlink, it is important to take on board the concept of oracles in the blockchain world. Oracles are like messengers that bring real-world information to smart contracts. Traditionally, oracles were controlled by a single source organization. Relying on a single source can be risky because if that one source stops working it can affect the entire system. Also, a single system is easy to manipulate. 

2. Chainlink Network Structure

Chainlink decentralized network contains multiple computers and nodes and each of these nodes is an independent entity. This independent network ensures the security and reliability of the network and its resistance to censorship.

Here's a simplified breakdown of how Chainlink works:

• Request: A smart contract on a blockchain communicates with the Chainlink network to request specific data information.
• Node Selection: The Chainlink network chooses certain nodes to satisfy the request made.
• Data Aggregation: The specified nodes obtain the required data from among others APIs, databases, or physical devices.
• Data Validation: The acquired data goes through a validation process and is combined in a manner that guarantees data integrity.
• Data Delivery: The collected and validated data is returned to the smart contract making it capable of carrying out its logic according to grounded information.

How to Use Chainlink?

Chainlink definitely has complicated technology but for most users there is no need to deal with it directly. Chainlink’s native currency is LINK which is used within the platform to cover the costs of services such as the performance of smart contracts with data fetched from outside sources. 

Here are a few guidelines regarding the various applications of LINK:

1. Service Providers: For smart contracts to successfully access the set external data, there is a LINK fee to be paid to the concerned data node operators.
2. Rewards for Data Providers: LINK is similarly used to pay node operators who are responsible or supply trustworthy data. And this gives them encouragement to keep doing good services.
3. Network Security: LINK is a staking cryptocurrency on the Chainlink network enabling it to be secured for future implementations. 

How to Choose a Chainlink Wallet?

For the purposes of working with Chainlink as well as its ecosystem, the use of the relevant cryptocurrency wallet is indispensable. A wallet is a digital medium that is used to hold, transfer, or even receive cryptocurrencies like LINK.

The following are some of the wallets that can be used for Chainlink;

• MetaMask: A widely used browser-based extension and mobile app supporting multiple blockchains, including the Ethereum blockchain area where Chainlink has been integrated.
• Ledger Nano S or X: These are hardware wallets that allow individuals to safely keep their cryptocurrencies including LINK.
• Trust Wallet: A mobile wallet that is easy to use and supports multiple cryptocurrencies including LINK.

When selecting a wallet, take into account the following considerations.

• Security: It is advisable to choose a wallet with enhanced security. These can include two-factor authentication and encrypted hyperspace. 
• Ease of Use: The wallet users also look for features that make the operations not complicated.
• Blockchains Supported: Users should be informed about the compatibility of the wallet with the blockchains where Chainlink is deployed, namely the Ethereum.

Key Components of Chainlink

The functionality of Chainlink depends on several key components working together in harmony:

LINK Token 

Link token is the official cryptocurrency of Chainlink Network. It acts as a means of payment for node operators who provide data and Oracle services. In exchange for these tokens, the data providers or node operators promise their loyalty to the network and the precision the of data they provide. Such a financial motivation guarantees the stability and safety of the Oracle network. 

Chainlink Smart Contracts

A smart contract is a contract in which every detail is already mentioned and the contract works itself according to these instructions Chainlink works with smart contracts deployed on various blockchain networks to provide these contracts with real-world information For instance, a smart contract can be set to release payments to a particular user after certain criteria are confirmed by a Chainlink oracle.

Chainlink Verifiable Random Function (VRF)

Chainlink Verifiable Random Function (VRF) is a proud achievement of Chainlink – a cryptographic-proof-based random number generator. They come in handy for various use cases including lottery, gaming, and DeFi applications. Most importantly, by utilizing VRF, the outcomes of such applications can be randomized and unbiased without the need of a third party.

To understand how VRF works, imagine a lottery. There are forms of lotteries that rely on traditional methods like lottery drums. However, Chainlink VRF eliminates the need for reliance on these methods. An intelligent agreement is able to call for a random number from a Chainlink node. It is a node that, besides coming up with a random number, is able to provide proof that the number has been generated in good faith. This evidence can be backtracked all the way to the blockchain by anybody, guaranteeing the correctness of the lottery.

Importance of Chainlink

Smart contracts are pre-programmed contracts that execute automatically on blockchain. They have been designed to automate a number of processes and eliminate the need for any middlemen or third parties. However, smart contracts are limited by the data that can be found on the blockchain. This is where Chainlink comes in.

Chainlink makes it possible to use smart contracts in many areas by providing them with real-life information. These uses include:

• Decentralized Finance (DeFi): Smart contracts in DeFi protocols can obtain relevant financial information data from real-world market sources, for example, price feeds, interest rates, and currency exchange rates. 
• Management of supply chain: The technology of Chainlink could be used to provide a record and history of how products moved in the supply chain.
• Insurance: Insurance services could also use Chainlink in processing cases where real events like climatic conditions or accidents activate claims. 
• Video games: Prediction markets powered by Chainlink could take information from outside the game, for example, the score of a sports game or a weather prediction.

In short, the entire mechanism provided by The World Wide Web and its backwaters of the connected blockchains is where the magic of Chainlink happens. With access to accurate and trustworthy information from the outside world, Chainlink ensures that blockchain technology grows in its capabilities.

Benefits of Using Chainlink

Chainlink provides many advantages and benefits to its users:

• Security: A decentralized system is better secured from attacks than a centralized system due to the absence of a single point of failure.
• Reliability: A high number of nodes ensures redundancy and lower chances of outages.
• Trustless: Chainlink makes trust in the data given possible by cutting off the need for any intermediary.
• Flexibility: The network is able to accommodate new data and new protocols, which makes it extensible and scalable.
• Chainlink proves that smart contracts can be connected to the real world in an efficient, secure, reliable, and hack-proof manner using a distributed network of nodes.

Chainlink 2.0 and Future Developments

Chainlink 2.0 is an upgraded version of the Chainlink network. This upgraded version improved the capability and security of the previous system. With this update, it becomes possible to meet the new demands of decentralized applications (dApps) which require more effective and secure Oracle solutions as well as more sophisticated and simplified data feeds.

Hybrid Smart Contracts

Another important feature of Chainlink 2.0 is the creation of hybrid smart contracts. These contracts combine the on-chain deterministic code with off-chain computational flexibility and adaptability. With the use of hybrid smart contracts and Chainlink's decentralized oracle network, complex computations can be performed, and real-world data can be utilized. This has opened a gate for the new endless possibilities for dApps.  

Cross-Chain Interoperability

Thanks to the CROSS CHAIN features of Chainlink, the 2.0 version of the blockchain will advance cross-chain interoperability even further. This shift will also enable communication and asset transfer between chains, facilitating the use of dApps across multiple blockchains and unlocking new opportunities for developers through cross-chain transactions. Developers will be able to think bigger with Chainlink 2.0, which will increase their ability to create progressive and complex DApps.

Final Verdict

Chainlink is like a bridge between the digital world of blockchain and our real world. has improved the functionality of smart contracts by solving their problem of data limitation. With this platform, smart contracts and blockchain have become much more reliable as it got connected to the real world. With its thoughtful solution, Chainlink has and will become an important part of the blockchain realm. 

How to buy LINK on CoinEx?

CoinEx is a global cryptocurrency exchange trusted by 5+ million users worldwide and has 100% reserve. Users can now trade quickly and seamlessly with its 900+ supported tokens, including the meme coins. 

To trade any airdrop token on CoinEx, follow the steps below. 

• Sign up for an account: Create a CoinEx account first. 
• Login to your account: Now fund it using deposit methods or cryptocurrencies. With funds in your account, you can quickly complete deals.
• Go to the Trading Page for the Token: Once your account is funded, proceed to the specialized token's trading page on CoinEx. Use the search box to find your airdrop token. If it’s not listed, try a different exchange,
• Choose a Trading Pair: Select the desired trading pair that matches another cryptocurrency. For instance, you may choose to trade LINK/USDT.
• Specify the Purchase Amount: Determine the quantity of the tokens you want to purchase. Input the amount in the trading interface, which will calculate the corresponding cost based on the current market price.
• Execute the Trade: Execute the trade with the specified amount. Confirm the details, and if you are satisfied, submit the order.