The productivity and usability of Smart Contracts will be worth it only if the data supporting the function is accurate. ChainLink is the decentralized oracle network that bridges the gap that arises due to the lack of accurate data and the virtual contract world’s inability to connect with real-time data.
The gap between the smart contract world on the blockchain and the real-time demands of the actual functional business world is fulfilled by ChainLink. The Oracles provide accurate data that can be efficiently used by smart contracts to deliver results that can be acted upon for delivering practical outcomes for any business process.
The Chainlink Framework facilitates different use cases. The capability of the Chainlink oracle is that it can track real-time data and transmit this data using an intelligent contract. The accuracy of the real-time data can be used to impose fines for rule-breaking immediately, release warnings during disaster situations like flood lines, bill companies who are using excess water by making use of oracle data.
Connecting smart contracts with legacy systems using API, blockchain, and the external data source is a fully rounded solution. Application Program Interface (API) is valuable because it can communicate with other products and services, and this happens without them having to know how it gets implemented. Two software talking to each other has excellent benefits in problem-solving. Thus, solving issues arising due to lack of connectivity and communication.
There is a need to validate, re-format and transport off-chain data to blockchain smart contracts in real-time, every day, and perhaps every minute in some business processes. Therefore, Oracles are indispensable. They are essential. This is also true in DeFi, yield farming, and several investment protocols where smart decisions should be taken by the minute.
ChainLink facilitates price feeds that are powered by decentralized oracle networks. These price feeds are very commonly used in yield farming for their accuracy and reliability.
Yield Farming has two main goals. One is to incentivize users to deposit and lock up their liquidity into a Defi Protocol. Second, the pools need to grow their Total Value Locked (TVL), thereby building the supply side of the ecosystem. If there is more liquidity, slippage will be reduced for their users. Therefore, it will create a growth in the demand side of the DeFi ecosystem.
Also, in yield farming, there is a need to distribute the governance token of the DeFi application to protocol users who will be absorbing the opportunity cost by not depositing their funds elsewhere, popularly known as the impermanent loss. Thus, the fair distribution of governance tokens leads to decentralized governance.
Thus, whether about improved governance, improved incentives, or fair distribution of any kind, ChainLink oracles have a role to play.