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A brief history
Chainlink was created by Sergey Nazarov and Steve Ellis, who authored a 2017 white paper with Ari Juels. Launched in 2019, Chainlink is described as a decentralized "oracle" network which aims to bring real-world data onto the blockchain. Oracles are entities that connect blockchains to external systems. Though traditional oracles are centralized, Chainlink decentralizes the process of moving data on and off blockchains through the use of "hybrid smart contracts." These hybrid smart contracts create access to off-chain resources, letting them react to real-world events and execute agreements that would otherwise need external proof of performance. As a result, Chainlink has been used to distribute non-fungible tokens (NFTs), gamify personal savings, and facilitate recalibrations of cryptocurrency token supplies, among other applications.
LINK in practice
The LINK token is central to the Chainlink network and is used to compensate Chainlink Node operators. These operators are responsible for the retrieval of data from external data sources, turning it into blockchain readable format, off-chain computation, and uptime guarantees. LINK prices for their services are set by the Chainlink node operator based on demand for the data they can provide and the current market for that data. Chainlink node operators also stake LINK in the network. By depositing LINK the nodes demonstrate their commitment to the network and incentivize good service. Additionally, The Chainlink Reputation Contract considers the size of a node’s stake (among other criteria) when matching nodes with requests for data. Thus, nodes with a greater stake are therefore more likely to be chosen to fulfil requests and thus earn LINK tokens for their services.