Chainlink Is Creating A Decentralized Monopoly That Can’t Go Unnoticed
By: Richmore Capital
Tags: Smart Contracts, Cryptocurrency, Decentralization, Technology, Blockchain

Chainlink is marching on as a dominant force among decentralized oracles.

Image by Pete Linforth from Pixabay

Chainlink is one of those altcoins that constantly pop into your feed and won’t seem to go away. The infamous “Anon frog army” plays a big part in putting Chainlink's name out there to some success. Chainlink is an underrated player in the crypto space so let’s dive deeper into it. It is not simply a cryptocurrency but instead an open-source platform designed to create decentralized oracle networks. What this means is that it is a unique and distinct computational environment that has a single purpose. They have one task at hand such as providing price data while another decentralized oracle network provides weather data related to a region etc.

Now I understand that this is not the most intuitive thing to grasp, so I will do my best to break it down for someone that is not the most technologically savvy person.

Why do Hybrid Smart Contracts and Blockchain Oracles matter?

Before we jump into it, smart contracts and oracles need to be explained. For anybody that isn’t into the rabbit hole already, smart contracts are programs that have been stored on a blockchain and when certain conditions are met, they execute. The situation is a little bit different with blockchain oracles, their job is to authenticate information and data from the outside world and provide smart contracts with information. This brings us to hybrid smart contracts which are deemed as more advanced considering they have the ability to interface with the outside world.

Photo by Ramón Salinero on Unsplash

Now you might ask yourself why it needs to interface with the outside world. So let me provide you with the infamous decentralized crop insurance example that Mr. Nazarov himself likes to use. Decentralized crop insurance gives you the ability to monitor the world's weather events through data sources. These data sources provide you with an indication of what the weather is and gives you the possibility to pay out an insurance policy to anybody on the planet that has an internet connection regardless of the insurance company. It changes things drastically by enabling you to simply using code instead, in relation to the risk for the farmer with an on-chain insurance contract. To do this you need to have a system that can reliably prove that the weather events that are covered by the insurance contract actually happened such as a drought or a storm etc. This is where Oracle networks are so important because they can reliably validate that there was an actual incident which allows the contract to be triggered automatically and then is paid out or vice versa.

Was that a lot to take in? Alright, let's slow down here. A rational question that would pop up now would be why the oracle network has to be decentralized, which I will make sense for you. The main idea is to not have a single point of failure because if you need data that is live and reliable and can’t be controlled by a bad actor for manipulation then decentralization is a better option. You need your oracle network to be resilient and incorruptible and that is what a decentralized oracle provides.

Chainlink is developing the decentralized Meta-Layer

As you have noticed by now, there are a lot of terms to get familiar with so let’s start with the Meta-Layer. The Meta-Layer is simply the layer between the smart contract world on the blockchain and the interactions that they need to operate with the real world. See it as a bridge between these two worlds. This decentralized Meta-Layer will bridge the gap between the data out there in the world and computation with the smart contracts that set the contractual definitions.

Image by Gerd Altmann from Pixabay

In other terms, it sits between the on-chain activity and the off-chain activity. An example of this would be connecting to a data source or sending a payment. However, let’s break it down again with a clearer example for the non-tech-savvy individual. When the famous car-sharing app that we use on the daily “Uber” was developed, they would have the base code for Uber and an idea in terms of how they would want the app to be developed. However, in order for them to proceed, the Uber team would have to reach out to Twilo first in order to have the possibility of sending text messages to the users. After that is settled, they would then have to need to have a clear data source to receive the customer's location which is Google Maps. Lastly, they would need to have a secure way of paying the drivers and that would be Stripe. Without all these parties involved, it is clear that Uber would reach a stumbling block.

Basically, if you would like to build a decentralized app that would require data from different sources, that is where Chainlink comes in and enables you to retrieve the real-time data using oracles and enables you to reach your goal. If you have any idea of what you want to do with a project on the blockchain that the blockchain does not utilize itself, that is where Chainlink and the Meta-Layer are valuable.

Chainlink is dominating the decentralized oracle space

Chainlink’s oracles and price feed have become the industry standard in DeFi and can be seen throughout the DeFi projects. As I am writing this, Chainlink’s oracles and price feeds have been integrated into over 650 projects and the growth is steadily increasing with the team announcing new integrations every week. The Hybrid smart contracts that Chainlink offers are even used by the stablecoin Paxos which utilize it for their price feeds and proof of reserves. Band Protocol which is arguably Chainlink’s largest competitor does not come close to the dominance that Chainlink has established due to its first-mover advantage. Most of the large DeFi project such as Aave has integrated Chainlink and it can be seen throughout the DeFi industry.

It is definitely a token worth paying attention to if you are interested in the underlying blockchain technology. Although there is a lot of technical concepts to grasp, there is a clear need for a decentralized oracle solution for crypto to keep evolving and reach its full potential and Chainlink seems to be positioning itself well to be just that solution. Projects like this are fundamental for the development of the internet of trust and value. The idea to exchange value in a secure way without a trusted intermediate makes decentralized oracles fundamental going forward. Do you believe Chainlink will be the solution and end up being a solid blue chip crypto? Time will tell.