If you have read the Bible, you know that characters like Prophet often appear in the Bible. So what exactly is a prophet? Under the literal meaning, it should be possible to know in advance what will happen in the future, but is this really the case?
Does this have anything to do with the topic we are going to talk about today? Of course, everyone translates the word Oracle into a prophet, but if you look up an English dictionary, the word Oracle means a person who communicates an oracle, and a person who can provide reliable opinions.
Chainlink, the topic we are going to talk today, is the world’s top Oracle project, providing valid on chain data to its customers and partners.
If you look at the price of crypto currencies this year, you will find that LINK is the currency with the largest increase in market value among the Top30.
But when it comes to Chainlink, many people may have only the two labels of "price skyrocketing" and "oracles", and they don't have a deep understanding of it. Many people don't even know what an oracle is.
So today, let’s take a closer look at Chainlink. What is Chainlink? What is the main problem it’s solving? What are the application scenarios of Chainlink? It has reached cooperation with many well-known companies or blockchain projects such as Google Cloud, Oracle, SWIFT, Polkadot, and we will also discuss its value from the perspective of Chainlink's ecological partners.
What is Chainlink?
To understand it, you need to understand what a smart contract is. In simple terms, a smart contract is a series of automatically executable code. To give a few examples:
If there is a typhoon tomorrow, send a message to inform everyone not to go to work
If Bitcoin reaches 20,000 USD, I will give Alice 100 USD
If you lend me 100 USD today, I promise to pay you 200 USD back tomorrow
If any conditions are met, what results will be triggered. This is the process of smart contract execution. But there is a problem in this. The smart contract cannot read the data off-chain by itself. An external data source must tell it what happened before it can execute the corresponding content.
In the Internet world, if you need to obtain external data in real time, you need to find the corresponding data interface. For example, if you want to get the weather forecast, you can find the interface of the authoritative agency that provides weather forecasts. If you want to get the results of a game, you can get the authority to access the interface of the sports website. In short, in order to ensure that the data is correct, this process may require human control, inspection, and confirmation of data.
But in the world of blockchain, because smart contracts are automatic and executable code, the process of obtaining external data needs to be more direct and requires greater trust, that is, a service is needed to ensure that the data off-chain is always correct.
The oracle is the platform that specializes in providing external information. It is a bridge, a middleman, and helps smart contracts connect data off-chain to realize data interaction between the blockchain world and the real world.
After reading this explanation, you should already know what an oracle is. It is easier to understand by calling Oracle a trusted data provider.
Then the oracles are divided into centralized oracles and decentralized oracles. Centralized oracles are prone to single points of failure and cause the entire system to fail. Relatively speaking, the data provided by decentralized oracles is safer and more reliable, and Chainlink is the first project to propose a decentralized oracle.
What are the applications of Chainlink?
Now that we understand that the oracle is a platform that provides reliable external data, all data-related industries can become the application scenarios of Chainlink.
For example, the rise of DeFi this year has also led to the concept of oracles. At present, the most important scenario for oracles is DeFi. For mortgage lending, the oracles are required to provide prices when loans are generated, and the margin rate is insufficient. Trigger warning in time in case of failure. Like decentralized stablecoins, oracles are also required to automatically obtain the exchange rate of stablecoins and anchored assets.
For example, gambling games essentially rely on unpredictable and verifiable random numbers to determine the final result of the bet, but it is impossible to generate random numbers on the chain. At this time, the oracle machine is needed to give the smart contract a secure and unpredictable random number from the outside.
For example, decentralized insurance is suitable for flight delay insurance, crop accidental weather insurance, exchange account security insurance, etc. The oracle machine can provide data such as flight status, weather conditions, and account funds for smart contracts.
According to the official introduction of Chainlink: Chainlink has been adopted by dozens of blockchain projects including Google Cloud, Oracle, SWIFT, Web3/Polkadot, Hedera Hashgraph, and Internet giants.
Internet giants and current leading blockchain projects have chosen to cooperate with Chainlink.
Coindesk reported in June this year that Google Cloud’s blog post showed that they would use "Chainlink Oracle Smart Contracts" to place BigQuery data on the blockchain, where BigQuery is Google’s data warehouse and business intelligence management solution.
One of the application areas of connecting cloud data to smart contracts through Chainlink is prediction markets, such as contracts that predict the future trend of Ethereum. Another possible application is advanced submarine sends. This method can temporarily hide transaction data and prevent miner pre-mining.
As early as last December, Chainlink announced its cooperation with the Web3 Foundation to help the development of Polkadot.
Web 3.0 is an era of interconnection of all things, and it will also be an era of DAPP explosion. Then Chainlink may become an important part of it, because the oracle solves the data interaction between the blockchain and the Internet and the real world, and the prediction function provides a lot of reliable off-chain data feedback, multiple APIs and traditional payment information. To be more direct, the blockchain must transmit off-chain data through an oracle.