Chainlink is a blockchain abstraction layer that creates universally connected smart contracts. This is accomplished by creating a decentralized oracle network which connects smart contracts securely to off-chain data sources, consisting of node operators (known as oracles) who gather and verify external data sources, smart contract holders that request this data, node operators receiving payment from requesters using LINK tokens for providing them with necessary data, as well as being awarded rewards based on performance – the more successful their performance becomes the higher their reputation will become and the more requests they will be selected from future requests!
Chainlink was developed out of an acknowledged need for safe, secure solutions to allow smart contracts to access off-chain data not available through blockchains directly. By taking advantage of such data sources, smart contracts could become more powerful and enable new applications – prompting Chainlink’s debut on Ethereum’s blockchain in 2019.
Chainlink oracle networks are comprised of numerous intricate pieces, each providing vital services to participants in its network. This includes open standards that describe oracle behavior as well as systems for rewarding and penalizing participants based on their contributions to it; additionally, an incentive structure exists to recruit oracles, data providers, and smart contract developers into its fold.
Chainlink oracle networks offer several distinct advantages over existing blockchains: integration into existing chains enables access to off-chain resources and data; this helps scale applications that require off-chain resources like price data tamper-proofness, verifiable randomness, automation functions or external APIs – providing further functionality needed by complex applications.
When smart contracts need data, they submit a Service Level Agreement (SLA) to the Chainlink network. The SLA includes details about what data is desired as well as parameters like maximum accuracy and minimum latency. After being received by Chainlink’s Order-Matching contract, this SLA is passed along to oracles offering relevant information which are then passed to an Aggregating contract that aggregates this into one answer; should two or more oracles give identical answers, this indicates false results which must be ignored by Aggregating contract.
Chainlink provides more than an oracle network; its platform also features numerous tools designed to aid both data providers and smart contract developers. For instance, APIs (software environments) make building smart contracts that use external data easier for developers; additionally it features a mechanism for staking LINK tokens which rewards participants of oracle networks while penalizing those who act maliciously or do not comply with network standards.
As is true for any crypto asset, Chainlink prices are determined by a variety of factors – these can include market conditions, supply and demand forces, technical developments, news cycles and general sentiment. Due to Chainlink being such an unpredictable cryptocurrency asset, its price movements can be hard to predict; to limit price volatility it is recommended to store your LINK tokens with an exchange wallet which provides enterprise-grade security while being user-friendly, such as Kriptomat for example.