Chainlink for Beginners

by Alan on 2021-02-14 filed under Crypto for Beginners

It can often be confusing to decipher the difference between the many variations of cryptocurrency and what is involved in their companies. Consider this your Chainlink 101 guide to understanding Chainlink and what you need to consider before investing.

What is Chainlink?

Chainlink is a decentralized network that provides live data to smart contracts on the blockchain. Smart contracts are pre-specified agreements on the blockchain that assess information and automatically activate when certain conditions are met.

Link coins are the digital currency used to pay for services on the Chainlink server. In case you missed it, smart contracts are arrangements set to execute when certain conditions are met. Smart contracts have been used for everything from creating online trading links to crypto-transfer centres.

Smart contracts require certain information to be passed between them from external data sources. Chainlink essentially bridges the gap between internal decentralized blockchains and smart contracts and the plethora of outside sources which feed live information into them in order for them to execute properly.

Chainlink works in three stages:

Chainlink, like many of the decentralized blockchains is run off smart contracts. These contracts can be broken down into three categories.

The chain link core is one component of the nodes used to transfer information. The core reads new SLA’s routes and send them to the Adapter. The adapter works to bridge the gap between the nodes and the incoming external data.

A Layman’s History of Chainlink

Chainlink first came onto the scene in September 2014, when its origin company SmartContract.com was to create a bridge between external data sources and blockchains. The group created Chainlink, that allows smart contracts to connect to data from any external data point. In 2017, the company tried to address this problem with the creation of the Chainlink network, a decentralized network of their own. In September 2017, Smart Contract raised over $32 million in order to fund the project build. In 2020 despite the Ethereum network holding a majority share of the users, the Chainlink system has risen in popularity extremely quickly.

How Do You Get Chainlink Tokens?

So, there are three different ways in which you can buy Chainlink Tokens. In this section we will break down the three methods in a simple Chainlink 101 buyers guide.

Centralized Markets

We will start with the most common, centralized markets. These are places in which you can buy stocks, such as Bitcoin, Ethereum, and Polkadot. The advantage of these is that they are widely accessible for most users, but often rely on paid memberships or trading fees. These are imposed by the marketplace in order for their users to trade their currency.

Decentralized Exchanges

If you are wanting more control on how you trade without the oppressive shadow of the centralized trading platforms, the decentralized markets operate a peer-to-peer trading system. They allow you to stay in control of your funds and currency, with no one but the buyer and seller involved in the transaction. Using this type of trading allows users to keep their funds inside of their preferred exchange, meaning that they can trade in any currency and asset they like without the restrictions usually imposed.

Digital Wallets

Most cryptocurrency buyers will have some form of digital wallet in which they store their online, digital currency for safekeeping. Some of these wallets will allow you to go a step further and actually buy directly using a credit or debit card or even using Android or Apple pay.

Services

Some may not think that the way forward for paying with regards to payment is crypto currency, but this is simply not true. In some circumstances, customers will pay for services rendered in cryptocurrency. An example of this is a contractor completing work on a website build and being paid in Chainlink tokens.

What Are the Benefits of Chainlink?

Chainlink offers a whole host of benefits to the networks in which it is connected. The oracles used by the system are vital to expanding the network. It gives decentralized exchanges the ability to read and calculate the prices of various cryptocurrencies without having to pre-order them first. In a world in which we trust so little, it’s comforting to know that, even though you are not familiar with those you are trading with, the system will protect you and your data from any harmful data that it receives. The system is designed to self-fix, allowing damaged nodes to be instantly replaced should the existing ones fail.

Why the Sudden Rise in Popularity?

Chainlink acts as a barrier and filter for any potential false information and broken data. Data fragmentation is an issue for marketplaces blockchain users because it becomes hard to collect accurate information meaning that results are often scattered. Chainlink is changing the way in which decentralized marketplaces work by altering the ways in which smart contracts operate on a fundamental basis.

Chainlink is so popular because it provides protection of any blockchains data. The decentralized solution the system has set up the ability for all blockchains to engage with their system and secure the data that is transferred between them and their users. Having access to this type of service has led to a huge rise in popularity for Chainlink.

Risks of Buying Chainlink

Of course, with all the good qualities that Chainlink carries, there will always be a risk with investing in this particular cryptocurrency and model.

The first risk of course is that Chainlink is still in its infancy, the system has only been around for a short period of time and the potential for error is still very high from a development standpoint. The management team at Chainlink will have to be careful with their execution of future updates and expansion and be mindful of the potential risks involved with being another blockchain system in an already overcrowded market.

Crypto volatility is always something to take into consideration when choosing your next investment. Like any stock or asset, you have to keep an eye on the market at all times, reading the peaks and troughs of the asset for signs of severe reduction in value or significant rise. Cryptocurrency is by nature fluctuating and can rise and fall in value in moments.

Summary

During this Chainlink tutorial we have covered the history, pros and cons of this particular cryptocurrency and what to be mindful of when investing. The cryptocurrency market is an ever-changing marketplace, constantly expanding with new ideas and systems being introduced every year.

Chainlink is an exceptional idea which will revolutionize the way in which decentralized marketplaces operate as well as increasing the efficiency and operational usability of blockchains. It will be an exciting few years ahead for Chainlink if they play their cards right.

Disclosure: I/we have no position in Chainlink and no plans to initiate one in the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Big Time Crypto).

Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of cryptocurrency. Investors are advised to review all documents and press releases to see if the cryptocurrency fits their own investment qualifications.