What is Chainlink (LINK)?

As we enter December, we look back at our LINK price prediction, provide an overview of ChainLink's platform and analysis the project's future.

What is Chainlink (LINK)?

ChainLink platform is developed as a secure blockchain middleware to connect smart contracts and external data, currently, it is primarily used with the Ethereum blockchain. Through the release of APIs and other tools, the developers optimize and enhance the usability of smart contracts in the business world. Blockchains with smart contract capabilities generally do not have any native means to communicate with external systems, which means they do not have a way to talk to legacy systems.

This is a major problem when it comes to bringing the benefits of blockchain to the traditional business world, for example, the backbone of banking or credit card payment systems run on technology that many consider to be part of the stone age. The solution is to use Chainlink's decentralized oracle network to query for any external data your Dapp or smart contract may need.

Connect Smart Contracts to external data (Source: ChainLink website)
  1. How does ChainLink work?
  2. What is the use case for LINK tokens?
  3. A decentralized oracle network
  4. LINK Token Details
  5. Price prediction LINK 2020

The Chainlink ecosystem is based on the LINK token and the ChainLink network. With the main function of the ChainLink network being to bridge that gap we find between on-chain applications and off-chain resources. This means that we find two primary parts to their architecture: an on-chain infrastructure and an off-chain infrastructure. Let's break down what both components are doing.

On-Chain

The on-chain smart contracts that power the ChainLink network are oracles that process user data requests. When a user submits a request for off-chain data, a requesting contract is used to ensure their request is sent to the correct smart contract to be matched with an oracle capable of providing them with their off-chain data. There are three different contracts that deal with the matching: the reputation contract, the order-matching contract, and the aggregating contract.

Behaviour of an Oracle (Source: whitepaper)
  1. The reputation contract checks that the oracle provider is trustworthy and reliable.
  2. If everything checks out, the requests moves to to the order matching contract which will decide which oracles are best suited for returning the requested data.
  3. Lastly, all of the oracles data is collected by the aggregating contract which passes the results back to the requesting contract.

Off-Chain

There are also several oracle nodes that make up the ChainLink network which are off chain, though they stay connected to the Ethereum network, or other supported blockchains. This is where the majority of the platform's work happens because these off-chain oracles are responsible for collecting the data being requested. All of the data collected will also first go through ChainLink Core which is software that enables the interaction between off chain data sources and the blockchain.

ChainLink Workflow (Source: whitepaper)

All of this work being performed by the off-chain nodes is not expected to be done for free. There is an crypto economic incentive for data collection and transmission as these nodes are paid in LINK tokens. Additionally, developers can integrate external adapters to off-chain nodes which can be thought of like plugins or browsers extensions that allow them to streamline data collection for their exact requirements.

ChainLink
Check LINK Order Book

A Decentralized Oracle Network?

Most likely you have heard the buzzwords around ChainLink being a decentralized oracle provider, that it does not have a single point of failure like centralized oracles. Smart contracts and Dapps can be tricky to update which is why you want to be sure the oracle you are using for external data will never go offline completely. ChainLink achieves this by what they refer to as Source and Oracle Distribution.

Requests are distributed in a decentralized manner (Source: whitepaper)

This means that even for a single data request it will always use multiple oracles to collect the data, and furthermore, the oracles themselves are expected to have multiple resources for their data collection. The idea behind this setup is to solve any fears of the oracle system being tampered with, to keep the integrity of the platform and ensure collected data is as accurate as possible.

What is a Blockchain Oracle? MakerDAO, Augur, Chainlink Review
Here we break down what is a blockchain oracle and how they work with a review of MakerDAO, Augur and, Chainlink.

If you would like to learn more about how a blockchain oracle works and the different setups currently being used, we reviewed ChainLink along with MakerDAO and Augur in a past article.

  • Project name: ChainLink
  • Symbol: LINK
  • Standard: ERC20
  • Current Price: 0.014179 ETH
  • Total Supply: 1,000,000,000 LINK
  • Circulating Supply: 350,000,000 LINK
  • ROI since launch: +1,223.63%
  • Website: https://chain.link/
ChainLink
Open LINK Order Book

We have analysed ChainLink's price before in a prior article, where we predicted LINK would be trading at the 0.018 - 0.021 ETH price range before the end of the year and outlined why the market is very bullish on LINK.

Chainlink (LINK) Price Analysis
Here Sam takes a look at what is currently the best performing crypto asset of 2019, Chainlink (LINK) price analysis. And this time we focus on crypto to crypto trading: LINK/ETH.

Currently, LINK is trading under this price range, though in the past 30 days we have seen it being traded as high as 0.022 ETH and it remains the strongest performing asset of 2019 with an yearly ROI well over 600%. We may even hit that price range before the end of year, but even if we do not, I believe the market will continue to be bullish on LINK throughout 2020.

The platform itself is seeing continued increase in use - which is a very positive sign, because remember data requests are paid in LINK tokens so the more the platform is being used the more LINK tokens will be needed and as a result the price will be driven up.

Steady increase in ChainLink usage (Source: @CryptoSpong3)

Along with the number of on chain addresses holding LINK tokens continues to increase, which shows the industry is very bullish on ChainLink as a whole.

Address count is exploding (Source: @CryptoSpong3)

We also have to factor in that ChainLink announced two very exciting partnerships this past year:

And lastly, the ChainLink team is currently really pushing to increase its adoption and usage throughout Asia - if it can put down some roots in these regions then we can really expect a big spike in usage (and traders buying LINK!).

Chainlink’s Growing Presence Throughout Asia
Over the last few months, Chainlink embarked on a multi-city trip across China, Korea, Japan, and Singapore to accelerate the adoption of connected smart contracts.

Furthermore, LINK has also historically created its own path in terms of price, and does not seem to be as attached to Bitcoin's price swings as other major cryptocurrencies. Note that the asset saw its all time high price of $4.54 in June 2019, a year where many major cryprocurrencies have been bearish. Which is why if ChainLink platform continues to move forwardly positively as it has done in 2019 in terms of usage and becoming compatible with more blockchains, then really the only direction for LINK's price during 2020 is up - irrespective of what is going on in the crypto market as a whole.

LINK Positive Price Trend 2020

I believe we will see the previous ATH of $4.54 broken during 2020, and if the bulls can drive the market above $5.00 then my price target for LINK in 2020 would be towards the $7.00 region.

Future is bright!

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