Why Chainlink is More Important than Most DeFi Protocols

Decentralized finance hinges on Chainlink (LINK). This oracle network shatters barriers between blockchain and real-world data, making smart contracts functional and reliable. But the LINK price seems undervalued; how can that be?

Blockchains need this service because they act as isolated networks; they cannot retrieve or send data to an off-chain solution.

Here’s why LINK is the most important DeFi protocol.

The Nitty Gritty of How Chainlink Works

(LINK)

Sergey Nazarov created Chainlink in 2014 and launched it in 2017. As a well-known cryptocurrency, it is listed on all of the popular crypto-trading platforms, including Kraken, Binance, Gemini, and Coinbase.

Without Chainlink, blockchains could not receive necessary data from external sources, making Chainlink a highly valuable project in this space.

Chainlink smart contracts essentially carry out three main functions.

Reputation assessment: Think of Oracles as nodes that feed information to a blockchain project. Oracles that act outside of these boundaries are penalized and downgraded.
Working with external data: In this step, proper oracles with the highest reputation are selected, and a systematic consensus is reached regarding transferring the demanded data.
Lastly, we have aggregation: Here, the aggregation contract gathers all the data conveyed by the off-chain oracles and then finds the median to form a weighted aggregate response.

The Bull and Bear Case for LINK Price Action

Chainlink is the backbone of crypto interoperability. It ensures that Bitcoin (BTC) and Ethereum (ETH) play nicely, brings banks into the fold, and enables Wrapped Bitcoin.

With support from titans like Google and Oracle, plus a plan to secure future presidential elections with cryptographic verification, Chainlink is everywhere. Its decentralized smart contracts also add a crucial layer of DeFi security.

LINK might be crucial for decentralized finance, but its critics are loud. They claim the LINK token is unnecessary—another cryptocurrency, like Ethereum could easily replace its role in powering Chainlink’s services. LINK’s dependence on network activity underscores its vulnerability, though its deflationary design could still make it a bullish asset.

Even Ethereum’s Vitalik Buterin has questioned the project, suggesting Uniswap could replace LINK as a leading oracle. For now, LINK dominates the space, but significant challenges remain.

EXPLORE: XRP Price Jumps 11% After SEC Crypto Unit Tease XRP ETF Progress

Join The 99Bitcoins News Discord Here For The Latest Market Updates