Earlier, the editor has introduced what is Chainlink. Chainlink oracle can use a variety of third-party services, such as inbound, outbound, software and hardware oracle, which further expands the range of applications that can be connected to reality. So, how does Chainlink work? What pain points does it solve? Next, let's have a look.

How does Chainlink work?

ChainLink works by connecting the blockchain ecosystem to external applications. It is connected to the blockchain at one end and integrated with the API at the other end. The solution is basically built based on a oracle machine, which is conducive to limiting the recognition of one party and working seamlessly in a decentralized infrastructure.

The core functions of ChainLink depend on two processes - on chain and off chain. The smart contract in ChainLink is "externally perceived", which means it contains a component that can help them integrate with non blockchain technology programs. On chain infrastructure is conducive to oracle selection and Oracle record establishment.

After completion, the agreement will be implemented offline, and then reported back to the infrastructure on the chain. The off chain architecture is configured with sub task mode, external adapter and its ChainLinkCore.

All components of the infrastructure can be upgraded. This solution is currently operating on Ethereum, but will be upgraded in the future to allow cross chain trading.

Use case of Chainlink

ChainLink can be put into as many real examples as you can imagine. From obtaining weather information to ensuring payment settlement network, it is conducive to the implementation of smart contracts. The network can use any external data and convert it into a response suitable for the blockchain.

The value of ChainLink has become more obvious in three industries:

1. Securities Smart Contract

ChainLink can be effectively used for bonds and smart contracts based on interest rate derivatives. They depend on the information provided on different financial websites, and they need APIs to report price quotations, etc.

2. Insurance smart contract

Data from external sources can be used when insurable events occur. Information feeds from IoT devices are suitable for defining insurable things and whether they need to be paid for.

3. Factoring financing smart contract

These contracts are suitable for determining the performance of contractual obligations. Data can be provided to the contract through GPS or the ERP system of the supply chain to ensure that all standards are met.

What pain points does Chainlink solve?

First of all, let's describe a situation.

To take a simple example, suppose Xiao Ming (decentralized use) is locked in the most secure and difficult to escape cell (block chain), and there is no newspaper, television, or other information that cannot be connected with the outside world.

If Xiao Ming wants to know which two teams are playing in the NBA championship this year (data), he can only rely on his friend Xiao Hua (data source) to visit him. He tells him through the microphone (oracle machine) that this year it will be the Warriors who play Seltik.

However, if this is a centralized oracle, it is difficult to ensure that the information provided by the external information provider (ex.comarketcap) is correct:

1. It is possible that the coinmarketcap crashes at a certain time point and the data cannot run

2. Coinmarketcap changes the data and gains improper profits

3. The website is attacked and the data is tampered with maliciously

In a word, it is difficult to ensure that the information provided is always correct. If you miss something, it will affect not only a few teams, but also millions of users.

Just like Xiaoming wants to bet on the team he likes based on his knowledge of the whole team, what if Xiaohua tells him that the information is wrong?

If the Warriors don't play Seltik at all this year, but the Lakers play Seltik, then Xiao Ming may bet the wrong team due to information errors, prompting him to lose the bet amount.

However, assuming that Xiao Hua is not the only one who comes to visit the prison, many people will also come to visit the prison. Xiao Ming's father, mother, brothers, sisters, friends, etc. (multiple data sources) (nodes) will tell Xiao Ming through the microphone (oracle machine) which two teams are playing at the top this year. Xiao Ming can evaluate which two teams are most likely to play in the championship this year by checking and selecting the information obtained.

Therefore, the emergence of Chainlink is to deal with the problem that it is difficult to ensure the accuracy of data from a single data source. Chainlink is also a kind of oracle, but it is a decentralized oracle. It uses the characteristics of decentralization to ensure the diversity of data sources, and combines the reward and punishment system to ensure the accuracy of data, so as to avoid the provider from crashing or altering data due to improper rights and interests.

Speaking of this, I believe you have a certain understanding of how Chainlink works and what pain points it solves. In general, the application scenario of Chainlink will not be limited to the interaction of decentralized application. Now more and more industries have introduced blockchain applications. We can imagine that in the future, we can ensure the accuracy of materials by combing nodes. As long as Chainlink can play where data is needed on the blockchain, Therefore, as the leader of decentralized oracle, Chainlink can really observe its future development!