This comprehensive review will let you learn everything about Chainlink, how it works, key features, pros and cons, etc.
Anyone watching the crypto space of late couldn’t miss noticing the popularity of Chainlink. It is popular because it attempts to solve a major problem in the crypto space integrating external data with the blockchain network. While smart contracts can execute a certain agreement between two parties, they can work with real-world data. Chainlink (LINK) aims to fill this gap by providing a solution to integrate real-time market data, bank transfers, and payments systems into the crypto space. In this comprehensive review, learn more about Chainlink and its features, pros and cons, and whether it is a viable investment in 2021.
What is Chainlink?
Chainlink is a decentralized platform that operates on the blockchain platform that enables smart contracts to integrate external data. With Chainlink, smart contracts are used in the traditional financial systems too. While there were many instances of decentralized applications being compromised easily, Chainlink came to the rescue to provide an additional security layer against malicious attacks.
The best example of the Chainlink platform and its application is a marketplace connecting sellers and buyers. It provides the ability of the smart contract, and hence no intermediary is needed between the buyer and the seller. Once the agreement condition is fulfilled, the smart contract code will get executed automatically. Since the platform operates on the Ethereum blockchain network, every transaction is highly secure and immutable.
How Does Chainlink Work?
The primary objective of Chainlink is to utilize decentralized oracle networks to get a reliable source of information and act upon it. Here, oracle refers to any external source with reliable and accurate data. Since the concept of decentralization will fail if only a single source of data is relied upon to execute smart contracts, the cryptocurrency platform utilizes a network of information sources or oracles to arrive at a decision. Based on the consensus of all parties in the network, a decision will be made.
Since blockchain transactions are immutable, it is highly important to rely on a source that provides accurate information. Smart contract services built on the Chainlink platform pays the node operators in LINK, the native token. The node operators determine the price for API or information set based on the market value and the data set.
How To Invest In Chainlink And Make Money?
If you want to invest in Chainlink:
- You need to open an account in a crypto exchange like Coinbase, Binance, eToro, and Coinmama etc.
- Deposit some funds in your account
- Buy Chainlink tokens
- Based on your crypto asset price movements, once you sense the right time, you can sell it to generate some profits
What Solutions Does Chainlink Aim To Provide And Its Use Cases?
Ethereum enabled blockchain developers not to limit only to cryptocurrency and took the functionality to the next level. With the introduction of smart contracts, various types of applications were built on the Ethereum network including products, property, sports etc. Various use cases include:
- Money Markets: One of the popular use cases is using smart contracts to connect the buyers and sellers. Lenders receive prompt interest payments and borrowers have access to funds at reasonable interest rates. One of the primary necessities of a money market is to have constant access to reliable price feeds. Aave is a popular platform that provides price feeds about more than 24 crypto assets using Chainlink.
- Bonds: With the emergence of Chainlink, traditional bond contracts are replaced with automated smart contracts. These smart contracts provide various data sets like debt interest rates, debt details, fiat payments etc.
- Real-World Assets: Another popular use cases that have gained popularity with smart contracts, NFTs and Chainlink is the tokenization of real-world assets. DeFi Money Market (DMM) is a popular use case of real-world assets using this crypto. In DMM, users can start investing on real-world assets through their native tokens, mTokens.
- Insurance: In our financial ecosystem, the insurance system was one of the oldest practices that comes with its own benefits and various illegal practices. Using Chainlink enabled smart contracts, an insurance contracts are made highly immutable. The contracts are made verifiable enabling all the parties involved to verify the details of the smart contract.
- Staking: One of the popular aspects of the decentralized ecosystem is the concept of staking. It is a process where users can hold their crypto assets for a specific period and earn rewards on it. One of the popular staking platforms utilizing Chainlink enabled smart contracts is AdEx.
Is Chainlink A Viable Investment?
One of the significant advantages of this cryptocurrency platform is that it finds other than the cryptocurrency space. Eric Schmidt, the former CEO of Google, has joined Chainlink as a strategic advisor. With its inclusion, limited supply, solid potential, and widespread community, Chainlink is one token crypto investors cannot leave out of their portfolios. With Metaverse, users may get several opportunities for crypto trading.
Things To Consider Before Investing
Before investing your hard-earned money in Chainlink, please give some time to consider the following factors outlined below:
- High Reliability on Oracles: One of the major issues is that the success of the token relies heavily on external data sets. If the data sets don’t provide accurate data, it will mark the platform’s downfall.
- Volatility: Crypto assets are largely known for their high volatility and this platform is no exception.
- Unregulated Market: The crypto industry is not regulated, and it takes a single order from the government to shut down the industry.
One of the main highlights of this cryptocurrency is that it attempts to provide a solution for a significant issue in the blockchain industry like Bitcoin, Solana, etc. It is the integration of external data sources with the blockchain ecosystem. Chainlink solves that with the use of Oracles and allows smart contracts to seamlessly integrate with external sources to provide solutions for various industries like Insurance, Sports, Weather, Stock value etc.