Who created it
Sergey Nazarov, Steve Ellis, Ari Juels
Why it was created
To provide a reliable oracle infrastructure layer so smart contracts can securely fetch and verify external data/events and perform off-chain computation without relying on a single source.
How it’s used
- Paying node operators for providing data/computation to smart contracts
- Deposits/collateral for node operators (economic guarantees of oracle service quality)
- LINK staking (Chainlink Staking v0.2) to increase cryptoeconomic security and strengthen SLA-style guarantees for services
- Infrastructure asset within the Chainlink ecosystem (Data Feeds, VRF, Automation, CCIP — where applicable)
Risks
- Quarterly/batch token releases (unlocks/transfers from reserve/treasury) can create sell pressure and increase volatility
- Centralisation-of-influence risk: key decisions/operations (development, releases, programme management) depend on a limited set of entities/team
- Price-feed incidents: oracle errors/delays/incorrect data can trigger liquidations and losses in integrated DeFi protocols and harm reputation
- “Bribery”/source manipulation risk: pressure on upstream data sources or parts of the data route can degrade feed quality
- Dependence on base networks (Ethereum/L2): congestion, higher fees, forks/upgrades can worsen oracle performance and affect LINK demand
- “Utility capture” risk: growth in Chainlink usage does not always translate proportionally into demand for the LINK token (due to payment models/integrations/contract structures)
- Regulatory risk: requirements affecting infrastructure tokens, data providers, or staking could restrict service availability or market access for LINK
- Competitive risk: pressure from alternative oracle/interop solutions can reduce market share and ecosystem growth
- Reputational contagion: major hacks/scandals in projects using feeds can indirectly reduce trust in LINK even without direct fault by Chainlink
FAQ
- Question: Is Chainlink a separate L1 blockchain?
- Answer: Chainlink is an oracle network (infrastructure) that connects blockchains and smart contracts to external data/computation; the LINK token was originally issued in the Ethereum ecosystem.
- Question: What is the LINK token actually used for in practice?
- Answer: LINK is used to pay node operators for oracle services and as economic security (deposits/guarantees), and it is also used within Chainlink staking mechanisms.
- Question: What’s the difference between a token “launch” and the protocol’s mainnet launch?
- Answer: The LINK token emerged via a token sale in 2017, while Chainlink’s mainnet launch (oracle services in production) dates to 30/05/2019.
- Question: What is Chainlink Staking v0.2 and what risks does it involve?
- Answer: Staking v0.2 is a mechanism to strengthen the cryptoeconomic security of oracle services; it includes penalty/slashing conditions for node operators who fail to meet requirements, plus an illiquidity risk during the participation period.
