If you are unfamiliar, smart contracts are set to be executed if and until those conditions are met. To date, smart contracts have been used for everything from the production of new crypto-financial goods to the development of new crypto properties.
However, the problem that has remained is that most smart contracts continue to rely on some sort of external database to better enforce their terms and conditions.
For example, smart contracts to duplicate bonds or insurance contracts may require access to market price reporting APIs or data from the Internet of Things.
Chainlink was designed to resolve this problem by allowing service providers (called “oracles”) to serve as a bridge between smart blockchain contracts and external data sources.
Each oracle within the Chainlink network is encouraged to have reliable data as a credibility score is given to each. Furthermore, when nodes obey the rules of the program and have valuable data, they are paid in the cryptocurrency of Chainlink, Connection.
Arriving in a competitive area of ventures in 2017, the Chainlink team has so far been able to deliver on its vision, extending activities beyond Ethereum (ETH) in the middle of a boom in business interest.
As of 2020, Chainlink aims to support all of the blockchain-based smart contract networks.
How does Chainlink work?
To facilitate communication between its users and external data sources, Chainlink divides its execution process into three distinct steps.
Oracle Collection – First, Chainlink users draft a service-level agreement (SLA) defining a series of data specifications. The program then uses the SLA to pair the user with an oracle who can supply the details. If the conditions have been set, the user submits a SLA and deposits their Connection cryptocurrency in an Order-Matching contract, which takes tenders from oracles.
Data Reporting – This is where the oracles link to external databases and collect the real-world data required by the SLA. The data is then interpreted by the oracles and returned to the contracts running on the Chainlink blockchain.
Output Aggregation – The last stage includes collecting the results of the data oracles gathered and returning them to the Aggregation contract. The Aggregation contract takes the answers, determines the validity of each of them and returns the weighted score to the customer using the sum of all the data collected.
The Chainlink blockchain is operated by three kinds of smart contracts.
Aggregating Contracts – Gather data from oracles and align the most reliable findings with the smart contract they need.
Order-Matching Contract – Compares the Smart Contract Service Level Agreement (SLA) with the best bidding oracles.
Reputation Deal – Verifies the credibility of an oracle by testing the track record. This covers variables such as the overall number of completed queries, the average response time and the amount of Connection cryptocurrency involved in the oracle.
However, Chainlink also deals with oracles who do not run on the blockchain and are individually responsible for gathering the real-world data demanded by the contracts.
The nodes consist of two components:
Chainlink Core – Chainlink Core is responsible for reading newly filed SLAs and routing activities to the Chainlink Adapter.
Chainlink Adapter-acts as a conduit between the node and the external data. The converter will read and process the data and write the data to the blockchain.
You can follow the current development status of Chainlink on its official project tracker.
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