What is Chainlink (LINK) and how does it work?
Chainlink (LINK) is a decentralized oracle network that connects smart contracts to real-world data and events. In simple terms, Chainlink provides a way for smart contracts to interact with data outside of the blockchain.
Smart contracts are self-executing agreements that are stored on a blockchain. They are able to automate processes and eliminate the need for intermediaries. However, they are limited in their ability to interact with the world outside of the blockchain. This is where Chainlink comes in.
Chainlink acts as a bridge between smart contracts and external data sources such as APIs, payment systems, and other blockchains. It does this by using a network of decentralized oracles that can securely and reliably provide data to smart contracts.
These oracles are nodes that are run by various entities in the Chainlink network. They are incentivized to provide accurate data by receiving LINK tokens, which are the native cryptocurrency of the Chainlink network. The data that they provide is then verified by multiple oracles to ensure its accuracy.
Chainlink has a wide range of use cases, including decentralized finance (DeFi), insurance, gaming, and more. For example, in DeFi, Chainlink can provide real-time price feeds for assets, which is essential for the proper functioning of many DeFi protocols.
Overall, Chainlink provides a crucial service for the adoption and expansion of blockchain technology by enabling smart contracts to interact with the world outside of the blockchain.