LINK token: how the decentralized Chainlink network is changing blockchain

How do blockchain applications get real-world data? Through oracles. And how do oracles get paid? Through LINK—a token that became one of the top 15 by market capitalization by the end of 2023.

What does LINK actually do?

Chainlink is a simple idea with a complex technical implementation: smart contracts need real-world data (stock prices, weather, insurance payouts), but they can’t get it directly from the blockchain. The solution? A decentralized network of nodes that transmit this data. They get paid in LINK.

Here’s how it works:

1. The smart contract needs information
2. It requests it via Chainlink
3. Oracles (network nodes) provide the data
4. Oracles get rewarded in LINK
5. Oracles stake LINK as collateral—a quality guarantee for the data

This staking mechanism is key to security: if an oracle provides incorrect data, it loses its LINK. So, the incentive to provide accurate information is maximized.

Technical aspect: Why ERC-677 instead of just ERC-20?

LINK is built on Ethereum using the ERC-677 standard—an extended version of ERC-20 that allows data to be transmitted along with token transactions. For Chainlink, this is critical: transmitting data + value in a single operation = greater flexibility for smart contracts.

LINK economics: supply and distribution

Total supply: 1 billion tokens (capped, creating scarcity)

In circulation: ~556.85 million LINK (as of November 2023)

Distribution: In June 2023, Chainlink revised its issuance plan for greater predictability. For 12 months from Q2 2023 to Q1 2024, 7% of the total supply is expected to be released. The following 12-month periods will have similar volumes (unless external factors change the plan).

Where is demand for LINK growing?

Partnerships are game changers

Recently, Chainlink brought in ANZ Banking Group (Australia and New Zealand). What this means:

• ANZ is piloting Chainlink’s Cross-Chain Interoperability Protocol (CCIP)—a protocol for moving assets between different blockchains
• ANZ stablecoins can now flow across networks to purchase physical assets
• ANZ believes CCIP will significantly accelerate the adoption of tokenized assets by financial institutions

SWIFT is in the game too. Chainlink is working on integration with SWIFT (the interbank communication standard) so financial institutions can conduct blockchain transactions using familiar protocols.

Each such partnership = more demand for LINK as the currency of these integrations.

Challenges and competition

Chainlink isn’t the only player in the oracle market. Competitors also offer similar services, which could affect Chainlink’s market share and, accordingly, the price of LINK.

Additionally:

• Regulatory uncertainty in the crypto space may force Chainlink to adjust its offering
• Innovation is critical—market leaders must keep evolving or risk being overtaken

The future: decentralized governance?

Their community is debating a transition from centralized governance (where decisions are made by SmartContract Chainlink Ltd.) to a decentralized model where LINK holders vote on network updates, oracle selection, and other key decisions.

If this happens, LINK gains a new layer of utility—a vote in the future of the ecosystem.

Conclusion: Why is LINK significant?

LINK is not just a token; it’s the currency that connects blockchain to the real world. By the end of 2023, it was in the top 15 cryptocurrencies by market capitalization for a reason.

With the growth of DeFi, blockchain-based insurance, supply chain management, and real-world asset tokenization, demand for decentralized oracle services like Chainlink will only increase. And with it—the potential value of LINK.

For those tracking the intersection of the real world and blockchain, LINK is an interesting asset.

Trade LINK on Gate.io