Chainlink: The Oracle The Crypto World Needs

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Oracle networks like Chainlink (CRYPTO: LINK) could redefine the future of the decentralized finance world, as was recently discussed between Motley Fool contributor Chris MacDonald and Motley Fool analyst Asit Sharma on this episode of ” The Crypto Show ”from Backstage Pass, recorded on October 27.

Asit Sharma: Let’s start with Chainlink. It is, by market cap, the 15th largest crypto, with a market cap of around $ 14 billion.

Chainlink is a decentralized Oracle network that enables universally connected smart contracts. I’ll try to explain this in a second. It allows blockchains to securely interact with external data flows and payment systems. It’s interesting. When we think of how digital assets interact with each other, we often think of peer-to-peer transactions on the blockchain. Let’s say validation is a big part of that, so a transaction happens on the blockchain.

We have discussed Bitcoin mining (CRYPTO: BTC) as a proof of work mechanism to validate this. But I think what’s less understood about this space is that since blockchains have more use in the outside world, I’ll call it the real world, although I’ll admit, Chris, that I am not sure what the real world actually is and what the virtual world is anymore.

As these currencies begin to interact with the outside world, you need secure mechanisms to be able to link data from that world to these peer-to-peer transactions. For example, think of a price stream. If we take a look at the assets we discussed last week, say Compound, Aave – these are decentralized financial platforms. We discussed their ability to provide liquidity and perhaps generate some interest through these coins and perform personal financial transactions on them – loans, borrowings, even insurance. You need some sort of link between the price feed and the asset, so the underlying data feed for those, especially the compound for these networks, has to be provided by someone.

Chainlink is an Oracle network. By that I mean it provides external data feeds and Oracle is – I think the easiest way to think about it is – just a data conduit from any data source to the blockchain. . What Chainlink does is extract data from outside and then have utility inside a network.

What other thoughts or comments do you have? And I will talk about it a little more as we go.

Chris MacDonald: I think this utility element is very important and that Chainlink allows the integration of non-blockchain data with data on the blockchain.

Being that middleman of Oracle and crypto, I guess, creates a lot of utility in the crypto world for blockchain networks that mostly rely on integration with the outside world. There are a number of examples of this where real world data, like you said, what is the real world again? But the data of businesses, businesses, whatever they want to store on the blockchain, well, there has to be a way for them to do it.

The value of Chainlink really relates to the utility it can provide, and it’s like you said, it’s intriguing to watch.

Sharma: To give you an example of a real-world application, I noticed last week that the Associated Press said it was teaming up with Chainlink to put its journalism on the blockchain.

Perhaps a concrete example in terms of technology is the API, the application programming interface. We’re very used to looking at software as a service companies, Chris, and understanding that if you’re a developer and have access to, say, a DocuSign API (NASDAQ: DOCU). If you have access to this API, then you can put an electronic signature on your page, regardless of your website or mobile app.

The blockchain interacts with these external data flows, actually using APIs and other methods to deliver all kinds of information. Associated Press either they provide stock price data, but they also have all kinds of interesting data like sports news, sports game results, election, race calls, whatever they put in. their press release about it. If you think about the data we’re looking at, maybe on a big election night that’s coming up, and you see the percentages changing every minute. You try to see who is going to win the race that interests you. You see your candidate has 51 percent of the vote and now it’s 51.1 percent of the vote. This is provided by organizations like the AP.

How do they move that to the blockchain if there’s a token that’s going to help? I’m sure it’s over there because I’ve seen it in other forms. Help users bet on the outcome of an election. It will do this using its API.

Really put that in a note in Chainlink’s blockchain and then Chainlink will allow smart contracts to occur which represent the bets that a person can use with real digital money. You can see how very complex it sounds like, but in essence it’s really about connecting pieces of technology that we’re already using.

Again, what is essentially an information network – that’s all blockchain is. In the end, it’s a series of records. A long database of interrelated sequential records. Do you have any other comments or thoughts before moving on to the next one?

MacDonald: Just that I’ll be the first football or hockey pool user that works on the blockchain. Maybe there is already one there. I don’t know, but stuff like that real apps is what gets me excited about crypto. Chainlink is really that middleman that makes a lot of things happen, and I think that’s why so many people are excited about it.

Sharma: It’s a fun asset to follow. Finally, it must be said that I like the capitalization that is there. I like the fact that it’s a huge asset. In some ways, it’s already proven.

When you see press releases from organizations like the Associated Press you understand that this has a use, but the fact that the native token itself, Link, has so much money behind it right now, which we have said, the 15th largest asset by market cap. These are the types of assets I look for first, rather than the more speculative assets and try to build a portfolio.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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