Chainlink, the oracle network whose mainnet launched on the Ethereum blockchain on June 1, 2019, connects smart contracts on the platform to those running on external blockchains. Enabling smart contracts to source their data from other decentralized protocols removes the need for a trusted third party to provide data. If you have a computer, you can set up a node on the Chainlink network and begin earning LINK by supplying data for other smart contracts on the blockchain to connect to and utilize. Most smart contracts platforms do not give developers the ability to receive and utilize the information that is passing through external data sources. The Chainlink protocol solved this issue by developing a distributed oracle network that is trustless and reliable. Chainlink provides these enhanced capabilities without the need to compromise on security. Chainlink smart contracts are maybe even more secure than competing smart contracts because the connection points to third party data remove the single failure point that exists if you are operating within one system. Adding security is beneficial because it adds to the total value of the smart contract. Another benefit of the Chainlink oracle network is that it solves issues that are present when using a centralized oracle system. Centralized oracles systems are not distributed, leaving a single point of failure. They are not tamper-resistant, so your data is susceptible to being altered. Centralized oracle systems also lack the immutable and trustless nature that stems from interacting with a decentralized network.
Chainlink’s ecosystem has a degree of decentralization that is above average for blockchain protocols. The Chainlink team achieved by balancing nodes out based on their geographic location. This means that node operator who successfully complete jobs that add security to the network and maintain the platform are spread out around the globe. The data that is supplied by API providers are vetted to ensure that it meets a high standard. When working wiht digital financial assets, it is imperative that price feeds deriving the live value of an asset are completely accurate. The vetting process is as follows; the data goes through a review process where it is verified and confirmed prior to being eligible to exist on the Chainlink protocol. The node operators also perform an end-to-end verification process that confirms the immutability and security of the information. Developers can leverage the Chainlink platform to create DeFi tools to assist them in completing certain tasks. Synthetic Assets are one example. Chainlink offers developers with the ability to create Synthetic Assets, which are virtual assets, typically in the form of a token, that derive their value from an asset in the real world such as stocks, gold, or real estate. Chainlink’s DeFi features can also be leveraged to develop lending and borrowing systems. These systems also require verifiable price feeds to ensure that outstanding debt and interest is accurately tracked by the network. Likewise, developers can use Chainlink’s DeFi tool to build a stablecoin. Stablecoins are digital assets that are pegged to a real-world fiat currency. For example, Tether (USDT) is a stablecoin that is pegged to the United States Dollar (USD). The value of Tether will always be 1 and that 1 represents 1 USD. If you wanted to build your own stablecoin that is pegged to the value of a fixed price asset, you can do so seamlessly on the Chainlink platform. The Chainlink network uses these data feeds by first importing the raw accumulated data and validating it. Once the data is initially validated you can further import it into your smart contract. Now that your smart contract is connected, it will continue to use that data feed until you specify otherwise.
The Chainlink platform provides for many different types of security solutions. These solutions include a contract-upgrade service, a certification system, a reputation system, and a validation system. The contract-upgrade system analyzes different oracles to ensure that they are acting honestly and equitably on the network. This security service is optional but may add additional fortification to your applications. The certification tool is a security service that judges and ranks oracle providers to allow others to participate on the Chainlink platform to make better decisions about which oracles they want to interact with. The certification will be offered as an endorsement for an oracle that is deemed to be a top performer. You will have the option to identify the top-performing oracle and compete with others to use them. Below the certification security service, there is a reputation security service. This is where each oracle is examined individually. The reputation security service uses predetermined criteria to assess an overall rating for each Oracle. These ratings are publicly available. The last security service is the validation security service. This is the first layer of assessment that each oracle provider passes through. This is where the criteria assembled by the reputation security system generates. To review the process, the validation security system creates criteria that is used to measure the performance of oracle providers that are participating on the Chainlink platform. Next, the reputation system organizes the performance metrics so that the certification system can compile al of the data and list the top-performing oracles.