Chainlink’s Role In Decentralization And What You Need To Know About The LINK Token

Smart contracts are an essential part of the decentralized movement because they facilitate trustless transactions on blockchain networks. Such transactions require off-chain data to fulfill some of the conditions of the contract.

Unfortunately, data providers are centralized, which introduces cracks in the system that can be used to manipulate smart contracts. Chainlink is a blockchain network designed to facilitate the availability of decentralized data for on-chain resources such as smart contracts. The blockchain is designed to provide access to data that can be verified on the chain, thus eliminating points of weakness as far as the data is concerned.

Chainlink plans to overcome the challenges of centralized off-chain data through oracle nodes developed into its blockchain. The oracle nodes contain immutable publicly available data stored on the network making it easily accessible. This eliminates concerns of unreliable data from data providers. Chainlink is also designed to facilitate blockchain interoperability, thus acting as a network that can link all the different blockchain networks. This characteristic further strengthens the ability to easily access data.

The role of the Link token on the network

The Chainlink blockchain triggers logic through a TransferAndCall functionality and it plays a vital role in the platform’s economic model. The network uses the Link token whose role is to facilitate bonds for running Chainlink nodes and it is also used by smart contract operators as payment to node operators. Its use as a bond means it is used as the payment that guarantees node uptime which is important for the smart contracts involved.

The node operators risk losing their staked amount if they fail to maintain the timely availability of the essential data. However, node operators Link token demand is directly dependent on transaction volume on the network. If more smart contract developers start using Chainlink’s oracle services, more Link tokens will be required to facilitate their data requests. This means that the value of the token will increase in value over time as more adoption takes place on the network.

The Link token currently ranks 14th on the Coinmarketcap and is currently trading at $22.98 which is notably lower than its all-time high price of $53 which it achieved in May before the crypto market correction. Its current price is still notably higher than its sub-$10 price at the start of 2021.

Chainlink LINK USDT
 Source- Binance

Although the recent bear market had a significant negative impact on the Link token’s value, the growing demand for the network highlights more growth potential in the future. For example, smart contract operators will require the token to pay the node operators while the node operators will require the token to maintain uptime.

The amount of the token needed for staking will increase over time and this will influence the supply characteristics of the token. Tokens locked into the smart contracts will be taken out of supply and this dynamic will have a substantial impact on price relative to demand. All these factors will depend on the level of demand for the network. If the number of users is low, then the value of the token will remain low. If the number of users increases, then the demand for the token will subsequently grow.

Chainlink has seen a lot of growth in network activity over the last 12 months, which means that the network is rapidly gaining new users. This trend will likely continue as the crypto market continues to mature over the next few years, which means the Link token might enjoy relatively strong growth moving forward. The network has also achieved impressive awareness evident by the widespread availability of its Link token on some of the leading exchanges in the world. The growing demand for off-chain data strategically allows Chainlink to capture a lot of value from the DeFi movement.