Plans to expand Chainlink’s oracle network and boost security with a new staking system could send Chainlink’s price soaring this year. Chainlink’s decentralized network is built to get information from the real world into smart contracts in a safe and reliable way.
How does Chainlink work?
If a smart contract needs information from an external source, for example the Bitcoin rate in dollars, it can request it from the Chainlink network. When a smart contract submits an information request to Chainlink, the oracles in the network give different answers. The “collective contract” takes all those answers together and then turns them into one clear answer.
Oracles then receive a reward in the form of LINK for their work. While Chainlink is best known as a decentralized oracle network that provides information to smart contracts for decentralized solutions, it works for other things as well. For example, it provides off-chain data reports for the SWIFT payment system and AccuWeather.
In principle, anyone can run a Chainlink node, but not everyone is allowed to join as an oracle. For that, you have to survive the admission process. Furthermore, it is good to know that Chainlink is not decentralized in the way that Ethereum is. Chainlink’s nodes are distributed across various data centers around the world.
Chainlink Strike
To boost Chainlink’s security, the project developers plan to implement a staking system. After Chainlink Staking is complete, nodes can deposit LINK tokens as collateral, which are then taken from them if they pass on wrong data. The LINK of nodes that have wrong data then goes to the honest nodes in the network.
Network security should improve once the staking system with penalties for dishonest nodes is up and running. The team hopes this will make the cost of attacking the oracles so high that it is no longer attractive. In this way, the Chainlink network benefits from the same game-theoretic principles as Bitcoin and Ethereum.
In addition, Chainlink Staking makes it possible for the community to run their own node. The developers expect strikers to get a return of about 5 percent year-on-year. Depicted in LINK tokens of course. This means that the inflation rate of LINK will probably be 5 percent per year.