Maybe you have heard of Chainlink and wondered how it’s different than other cryptocurrencies. How does Chainlink benefit someone’s life in the real world? Also, would Chainlink be a good investment?
Chainlink provides real-world data to smart contract blockchains! This real-world data could be weather, stock prices, travel info, sports scores, exchange rates, damage verification of insurance, or anything else.
Keep reading and I’ll share the pros and cons of investing in Chainlink. I’ll also share how you can run a node and get passive income for supplying data. Plus, I’ll share 2 ways that make Chainlink different than other crypto projects.
What is Chainlink?
Chainlink is a decentralized oracle network that provides real-world data to a blockchain. You could think of Chainlink as a chain that connects a blockchain to the real world.
Some blockchains need data from the real world for them to be effective.
One idea on how this would work would be a stock market. Yes, stocks can be traded on a blockchain around the world. The problem is how would a blockchain know what the price of a stock is?
The only way for a blockchain to know if a price is accurate would be by using a third party or a price oracle. What makes Chainlink different than ALL other cryptocurrencies is that its MAIN job is to provide this real-world data.
Oh, and it’s completely decentralized. This means many people provide this real-world data, so there are options.
If there was only 1 source (centralized) place for this information then that is risky. If that 1 source of information was corrupted then blockchains wouldn’t have another option!
What is “really” cool about this project is it can provide data on more than just stock prices. Other use cases could be…
- Weather
- Real Estate Prices
- Travel
- Sports Scores
- Damage Verification (Insurance)
- Exchange Rates
If you use your imagination “almost” any type of data can be used with Chainlink to support a blockchain.
How Chainlink Nodes Work?
The nodes on Chainlink or you could call them “oracles” provide real-world information to a smart contract on a blockchain. In order for the smart contracts to access the oracles, they have to pay with the cryptocurrency native token called LINK.
By running a node you can take jobs to provide real-world data to people who want them. By providing this real-world data you get rewarded with LINK tokens (that can be traded for CASH.)
The pay you get is determined by the person who created the job and this depends on what kind of data you are providing.
I know what you might be thinking “shit maybe I can become this GREAT oracle and make good money right?
The cool thing is you CAN do this and the first step is you need a computer with as little as 10 GB of storage and 2 GB of RAM.
Yea, just using a smartphone isn’t going to cut it.
After that, you have to follow MANY steps. It helps if you have an Apple computer or Linux I tried on Windows and got to the end and I couldn’t get it to work. (I probably did something wrong)
It’s fairly complicated and technical. (Basically, it’s a pain in the ass!)
If you’re up for the challenge here is (I think) the easiest way to run a node.
https://docs.chain.link/docs/running-a-chainlink-node/
https://medium.com/chainlink/running-a-chainlink-node-for-the-first-time-4988518c95d2
At the time of this blog post, you can actually run a node and start to take jobs. You don’t even have to provide collateral and stake LINK tokens yet.
In future updates, you will have to stake LINK tokens as collateral. This ensures you will do your job and provide accurate information.
If the information you provide isn’t accurate or maybe you don’t complete jobs then you will lose out on the tokens you staked.
When this will happen, nobody knows because the developers behind Chainlink don’t give dates and when things will be completed.
It will be done, when it’s done.
To keep things simple the LINK token is used for 2 things only!
- Pay oracles to get their data.
- Stake the token so someone can become an oracle.
How Chainlink is Different?
Chainlink is unique because it’s the only crypto project that helps other blockchains with real-world data (oracles). Another way it’s unique from other blockchains is the mining.
Most crypto projects use a proof of work model or proof of stake model.
Proof of work is Bitcoin’s model that uses computers to solve complicated math problems. Proof of stake is when someone stakes their coin to support the network.
Nearly all proof of stake models do not require any work except depositing money.
Chainlink is different because there is NO way someone can stake LINK coins and make passive income “doing nothing.”
The only way to earn money is by running a node “taking jobs” and supplying real-world data to the network. At the time of this blog post, you don’t even have to provide collateral to take jobs.
In the future, you may have to stake LINK in order to take these jobs!
Here are 2 ways Chainlink is different than other blockchains.
- Chainlink ONLY helps other blockchains by providing real-world data to them.
- The only way to stake (mine) LINK tokens is by running a node (being an oracle) and providing real-world data.
Oh, and there is another way someone can stake LINK tokens and that is by joining a pool. One pool I know is this one right HERE.
They also can help you set up a node to take jobs and earn tokens.
Is Chainlink a Good Investment?
Chainlinks native token link has a max supply of 1 billion tokens. At the time of this blog post, there are around 440 million tokens in circulation.
The largest advantage Chainlink has is its first mover’s advantage. It already has some prestigious partners such as Binance, Tezos as well as Google clouds, Intel and Swift.
The million-dollar question is do you think there will be a rise in smart contracts on a blockchain? If so, then the demand for price oracles will probably rise.
If there is MORE demand and the supply shrinks can you guess what happens? The price could rise in the future if there is more demand, but anything can happen.
Oh, and due to the token being used for people to become an oracle this means the supply will shrink EVEN more.
There are some negatives with the token and one of them is the supply.
“1 billion” tokens is a lot!
Some people think this is a bigger supply than how many people will use the application. If there is MORE supply and less use then the price could not rise that much.
Also, there may be other players in the space of information oracles. Heck, some blockchains are implementing their own oracles.
Conclusion
I’m bullish on Chainlink for the long term, just like I am with Bitcoin and smart contracts. The truth is “it’s a risky investment.”
Of course, ALL crypto is a risky investment and whatever money you do invest you could lose it all. Don’t invest any money you can’t afford to lose.
The safest investment in crypto is probably Bitcoin. If you are interested in learning all the passive income opportunities I’ve found in Bitcoin you can check out this post HERE.
I hope this blog post on what makes Chainlink different than other cryptocurrencies was helpful to you, bye for now!