Chainlink Is About to ‘Melt Your Face’ – But What Exactly Is LINK About?

Crypto analyst Lark Davis posted a series of tweets outlining the fundamentals behind Chainlink and its native token, LINK. He believes Chainlink is “about to melt your face off” in the coming years thanks to the platform’s vital role in connecting real-world data to smart contracts.

The Problem Chainlink Solves

To understand Chainlink, you first need to understand the problem it solves. Blockchains like Ethereum enable smart contracts, which are self-executing agreements between two or more parties. However, smart contracts often rely on external data to execute properly. As Davis explains:

“However, blockchains are self-contained networks siloed off from the rest of the world and from other blockchains. So for a SC-enabled blockchain to work, it needs a communication bridge that connects it to real-world data or to other blockchains.”

This is where Chainlink comes in. As Davis puts it, “Chainlink is that communication bridge.”

How Chainlink Works

Chainlink serves as a decentralized network of “oracles” – programs that relay information between external data sources and smart contracts. For example, a decentralized exchange (DEX) may use a smart contract to allow trading of tokenized gold. Chainlink feeds the real-time gold price into that smart contract so the DEX can properly calculate users’ profits and losses.

Davis gave a simple example:

“Alice leverage longs tokenized gold on an Ethereum DEX. This all happens with an SC behind the scenes. The DEX is able to update Alice’s profit or loss because Chainlink is continually feeding that DEX with the real-time price of gold. That’s Chainlink.”

By pulling data from many sources and having the oracles cross-check each other’s work, Chainlink provides reliable data to blockchain applications. According to the developers, Chainlink has enabled over $9.3 trillion in value to be settled across smart contracts so far.

Transform Hundreds Into Millions With the Magic of Memecoins – think $BONK, but bigger!🤫

The key? Getting in early, especially during the IDO phase. Get in on NuggetRush now! This innovative memecoin blends play-to-earn gaming with real-world gold mining. Join soon to take advantage of the current ICO prices!

Show more +

The Role of the LINK Token

One of Chainlink’s strongest aspects is that its LINK token is essential to the network’s functionality. Davis explains:

“To receive data services, users (DEXs, dApps, etc) deposit $LINK into contracts with oracles. If the oracles provide accurate data to their users, they get paid the deposited $LINK. If they fail, they don’t. Because the oracles have operational expenses, they act accordingly.”

In other words, holding and staking LINK allows the oracles to be compensated for their services. This built-in economic incentive helps ensure network reliability.

As Davis concludes, “This is one of my favorite projects because the oracle network and the token are vital to tons of DeFi protocols and other dApps within the crypto ecosystem.” With smart contracts becoming more prevalent across blockchains, Chainlink’s bridge to external data should only increase in utility going forward.

You may also be interested in:

Check NuggetRush ($NUGX)

Sponsored: Invest Responsibly, Do Your Own Research.
Being in its ICO stage, NuggetRush offers a prime opportunity for early investors to get in at potentially lower prices
A unique play-to-earn gaming platform in the memecoin market
The platform combines artisanal and gold mining with cryptocurrencies in an unusual gaming context, offering a distinctive and immersive experience
Fosters a strong community by encouraging physical meetups among members
NFT Integration with Prominent Characters
intelligent crypto
How are  regular people making returns of as much as 70% in a year with no risk?  By properly setting up a FREE Pionex grid bot - click the button to learn more.
Crypto arbitrage still works like a charm, if you do it right! Check out Alphador, leading crypto arbitrage bot to learn the best way of doing it.

Tags:

Temitope Olatunji
Temitope Olatunji

Temitope is a seasoned writer with over four years of experience. He specializes in Web3 and FinTech topics and enjoys creating content in these areas. He holds both a bachelor's and master's degree in Linguistics. When not writing, he trades forex and plays video games.

CaptainAltcoin
Logo