Polkadot ecosystem, the Ethereum’s Contender - Crypto Academy / S4W7 - Homework Post for @allbert

in hive-108451 •  2 months ago  (edited)

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edited with canva

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1-Explain in your own words why you chose it and why do you think it is relevant to the world?

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The project on the Polkadot platform which I have chosen to explain and explore in this homework given by professor @allbert is the ChainLink protocol. I was particularly drawn to the project which is built on the Polkadot parachain because of the reason behind its creation. The reason for the creation of the ChainLink protocol was obviously because of the gap in interaction that existed between legacy technology and the blockchain technology. Blockchain as a technology has existed for more than a decade but a lot of its potential application and use has been deterred by a huge number of observable inadequacies. One of such is the inability of the technology to make proper use of real-world data as a leverage to its operations.

This was the focus of Steve Ellis and Sergey Nazarov when they conceived the idea to co-found the ChainLink protocol in 2017. The major aim and intention was to create a secure and safe way of linking the blockchain ecosystem with real-world data. That is why ChainLink was created as an 'Oracle' which works in the form of a platform that bridges the gap between real world applications and blockchain smart contracts. First, the network was connected to the Ethereum Network which is the blockchain from where smart contracts originated. A good example is a situation whereby a smart contract that is hosted on the Ethereum network wants to have access to external data. The ChainLink network through its nodes would pick up this request and forward it through to any expected external or real world application.

After $32 million was realised by its founders in 2017 through an organised Initial Coin Offering (ICO), 1 billion Link coins were supplied. The token was to be used in the ChainLink ecosystem to facilitate transactions. As such, a node provider who executes a smart contract in the ecosystem receives Link as a reward. The Link tokens were developed with the architecture of the Ethereum network where they were made to function after the ERC-223 and ERC-20 tokenization standards. So, in the 2017 ICO held in September only 35% of the tokens were given out to the public while another 30% was left to facilitate transactions within the network. The Link token comes with a kind of flexibility which fiat or government controlled currencies cannot achieve. An example is that Link tokens can be used to make transactions within an environment that is trustless unlike fiat currencies that completely rely on the operations of intermediaries or third parties such as banks. Again, Link tokens are staked at a hard cap of 1 billion and this offers a protection against inflation which fiat currencies cannot boast of.

Furthermore, the ChainLink protocol boasts of three important innovations that are very relevant to its core operation and application to the real world. These important innovative processes include:

  • Selection Of Oracle: Usually, a Service Level Agreement (SLA) that specifies the kind of data required is drafted by users of the ChainLink service. The oracle that is most appropriate in providing this data is connected by the ChainLink software to match the SLA. Finally, the parameters are set and the SLA is submitted by the user together with the Link coins that would be put into the order-matching contract that is responsible for accepting bids.

  • Reporting Of Data: Once the ChainLink SLA has requested data from the real world, the external data sources are connected by the oracles. When they are obtained the oracles process the data and send them back to the on-chain contracts which require them.

  • Aggregation Of Results: The last step in the important innovation brought by the ChainLink protocol in its operation is to return to the Aggregation Contract, a result of the data obtained which must have been tallied by the oracles. Once the Aggregation Contract receives a data point it assesses how valid each of the data points are. Then, it makes use of the sum of all the data it has received to produce a weighted score which is returned to the smart contract or user.

The foregoing describes the major reason and important innovations behind the creation of the ChainLink protocol. Interestingly, this equally summarises its relevance and importance in the real world. However, there are a lot of other interesting use cases and real-world applications of this protocol which I will enunciate in the succeeding sections to buttress my choice of the project for this week's homework task.

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2- Description of the project and its platform. (Screenshots needed)

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As a way of further describing the project, its platform and how it works, we should not forget that the ChainLink protocol, as a form of digital infrastructure which acts in between data from off-chain sources and smart contracts from the world of blockchain, is actually formed as an interconnection of nodes. Each of these nodes in the ecosystem represents a peer. Actually, this acts as one of the major selling points of the network and marks its difference from some other blockchains that can be said to have a single point of failure. This is due to the fact that, though a decentralized environment is promised by the blockchain technology, in some ecosystems developers act in a way that can be likened to central control agents.

Contrastingly, in the ChainLink protocol each node operator is made to function as a point of failure meaning that the network becomes completely decentralized where every single node struggles to maintain a reputation, not the developers. That being said, when nodes succeed in providing accurate information in real time, they are given larger contracts and this makes it possible for such successful nodes to have more Link tokens. Conversely, in the servicing of smart contracts, nodes that deliver poor results would have their Link tokens deducted.

The ChainLink protocol is made to coordinate tasks among different projects or oracles that are meant to link real-world applications to blockchain data. Equally, the protocol shares communication data with other blockchain networks. For instance, an oracle or a project could make requests for data to be used by a smart contract. This task or request would be given to a node and if the node successfully delivers, it is rewarded with Link tokens. On the other hand, Link tokens are spent by smart contracts while placing bids for information or data needed. The ChainLink Core software lies at the core of the network. The ChainLink Core software works by translating the requests that have been received by the nodes into information that is understandable by off-chain applications. Then External APIs are used to route the requests that have been translated to the source of data. After this, the same APIs are used to route the data back to the ChainLink Core software which then translates them back to language or information that is understandable on-chain.

A resume of oracles and smart contracts informs us that:

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IF/THEN Mechanism
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  1. Smart contracts function as verifiable contract which are immutable and which are made to execute automatically when the conditions have been met in an IF/THEN mechanism

  2. Traditionally, data has been obtained from blockchain only to define the conditions that meet this mechanism.

  3. A recent development in blockchain ecosystem now has oracles bringing off-chain data to smart contracts on-chain

  4. However, these oracles are most often centralised and due to their potential lack of trustworthiness, the on-chain benefit expected from them diminishes

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Smart Contracts With External APIs
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This issue of lack of trustworthiness is eliminated in the ChaiLink protocol with the use of a decentralized network of nodes which brings in extra security while removing issues of reliability with just a single oracle or node.

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Service Level Agreement With Contract Requests
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Illustration Of ChainLink Smart Contracts

To give a more technical illustration to the smart contracts of the ChainLink protocol.

  • A smart contract on the blockchain requires data and releases a request known as Requesting Contract to obtain the data

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Service Level Agreement With Contract Requests
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  • The request is registered by the ChainLink protocol as an event and a corresponding smart contract called the ChainLink SLA is created to convey this request off-chain. On its own, the ChainLink SLA generates the ChainLink Reputation Contract, the ChainLink Order-Matching contract and the ChainLink Aggregating Contract, as three subcontracts.

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The SLA Subcontracts
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A. With the ChainLink Reputation contract the track record of an oracle provider is verified to authenticate its performance in history in order to disregard unreliable and disreputable nodes.

B. If the requesting contract does not select any particular node or set of nodes, the ChainLink Order-matching Contract takes the request of the Requesting Contract and delivers it to the nodes of the ChainLink protocol and collects the bids each node places on the request and finally selects the type and exact number of nodes needed to complete the request.

C. The ChainLink Aggregating Contract is responsible for taking the data from all the selected oracles and validating the data as a way of presenting an accurate result to be used in the execution of the smart contract

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The Subcontracts At Work
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How The Nodes Validate Data In A Reliable Way

Now, the nodes of the protocol collect the request for data from the Requesting Contract and with the use of the ChainLink Core software it is translated from a programming language only understandable on the blockchain to a real life programming language so that the real world data source off-chain would be able to comprehend it.

The version which has been translated is sent to an external application programming interface (API) which is responsible for collecting data from the external or real-world source. After the data is collected, the ChainLink Core software is used to translate it back to language understandable on-chain and forwarded to the ChainLink Aggregating Contract.

Interestingly, the ChainLink Aggregating Contract is able to validate data that is coming from both a single source or from multiple sources.

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CAC With Data Sources
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Assuming seven nodes present a report from a weather sensor and 3 other nodes present a different report, the ChainLink Aggregating Contract would be able to decipher that the other three nodes are dishonest or faulty and do away with their own reports. So, the nodes of the protocol are able to validate data that is coming from even a single source.

This validation process is repeated by the ChainLink Aggregating Contract when necessary for different or multiple data sources. After that, all the data is reconciled into a single piece of data by taking its average. In some circumstances, all the reports may not go into the averaging process but that involves a deeper analysis which I cannot undertake here for the sake of simplicity.

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Obtaining Reliable Data With CAC
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In this manner, the ChainLink protocol has devised a way of providing accurate data to their smart contracts in an efficiently reliable manner.

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3- Functionalities and real-life applications. (Screenshots needed)

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In the light of the foregoing, there are three major selling points and functionalities of the ChainLink protocol. These are:

  • No Single Recognisable Point Of Failure: In the ChainLink protocol, there is no centralised management of the network. This is an anomaly that is often seen in the management of some private blockchains or networks which unfaithfully promise decentralized interactions. This is made possible by the presence of a network of oracles which ensures that one going down will not stop others from keeping the ecosystem operational.

  • Bringing Blockchain Technology To The Mainstream: Actually, this is the area where the technology has a big drawback as it is not compatible with many applications in real life. ChainLink brings blockchain technology to the mainstream by translating on-blockchain data off-blockchain recognisable information and language. This makes information flow from the blockchain to real life in an effectively fast way. This huge advantage could be for legacy businesses who may wish to interact with projects from blockchains in the future.

  • It Offers Transactions A Better Form Of Security: chain link makes use of the reputation system and the reward of notes which are made to maintain the best results when it comes to the provision of accurate information and security. So, a single node cannot tamper with the security of the platform.

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As a way of describing the functionalities and real-life applications of the ChainLink protocol, I will be examining some of its use cases and case studies of successful applications. However, it should generally be understood that the network provides a decentralized oracle for smart contracts. This means that extensive off-chain resources can be utilised as a leverage by smart chain contracts. Such leverages can include external APIs, verifiable randomness, tamper-proof price data and keeper functions.

Some of the notable and useful functionalities and applications in real life of the protocol include:

1- Connecting Smart Contracts

Apparently and inherently smart contracts seem to be very much disconnected. This does not ensure that the real-world leverages the advantages of the blockchain. The blockchain technology is known to be highly reliable and very secure for the exchange of values. However, there is the lack of its ability to send data to off-chain networks or fetch data from the same sources in a reliably secure and efficient manner.

Chainlinks makes use of secure oracles as a way of connecting the real world with smart contracts. Consequently, off-chain computation, payments, events, real world data (like weather data, shipping data, price feeds, medical data, commodities and sports data, random data,etc) are connected to smart contracts.

Some very noteworthy use cases include:

  • The Aavegotchi project which pioneers its NFTs in a layer 2 network by using the VRF of the ChainLink protocol.

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  • The PoolTogether project which gamifies personal savings with the use of the VRF of the ChainLink protocol

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  • The Ampleforth project which decentralizes its rebasing mechanism with the use of the ChainLink protocol

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  • Polychain Monsters and Ether Cards equally utilise ChainLink in their NFTs solutions.

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2- A Most Trustworthy Network Of Oracles In DeFi Ecosystem

Oftentimes, very critical data from the financial market is needed for the issuance, settlement and security of a good number of applications in the DeFi ecosystem. The use of ChainLink Price Feeds provide a reliable succour in this regard. This is because the ChainLink network supports a lot of data and price feeds in live usage. This can be very useful in attracting enormous value in ten/s of billions for a lot of leading and cutting-edge applications in the DeFi world, in the CeFi world and even in many other institutions that have to deal with finance.

Consequently, some financial institutions have employed the use of ChainLink in this regard. Some of such products include DY/DX, Compound, Synthetix, Aave and Celsius.

Aave:-

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The Aave network leverages the ChainLink protocol, by utilising its independent network of oracles which are resistant to Sybil in getting lending rates or market prices from across the leading platforms on the net. Such data when obtained would be aggregated together in a process of formulating on-chain price which has been adjusted based on weighted averages and can now be fed to smart contracts when issuing loans.

So, the ChainLink protocol provides a trustworthy network for DeFi lending and borrowing in this respect.

3- Source Of Randomness In Blockchain

ChainLink VRF can be used in the generation of reliable randomness which is normally applied in the minting of NFTs, for powering unpredictable gameplay scenarios and in the distribution of random rewards. So, the ChainLink verifiable random function (VRF) gives so many games on blockchain the needed fair source of randomness in blockchain known as RNG with cryptographically fair and secure technology. This, in turn, gives users a very strong assurance of impartiality with the NFT applications they are being used on.

Some successful use cases in this regard include PancakeSwap, Aavegotchi, Polychain Monsters, PoolTogether and Upshot.

PancakeSwap

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On the PancakeSwap platform, the PancakeSwap Lottery is usually drawn twice a day. Each user participates by buying tickets that are made up of six digits. The winners of the draws are determined by checking how many of the digits on each user's ticket accurately match the digits which are usually generated with the use of the ChainLink VRF.

4- Automated Solution

The ChainLink project can be successfully used as an automation solution which can operate in a very reliable and decentralized way. This is made possible with the use of the ChainLink Keepers. These are used by developers of smart contracts in trying to outsource functions that will trigger their smart contracts and automate such contracts with the decentralized network of nodes in blockchain technology.

With the use of the network of ChainLink Keepers, smart contracts are monitored and the necessary computations that need to be done off-chain and performed in order to know when important on-chain functions should be called. This provides an automated service in a decentralized transaction which sets smart contracts in motion when necessary.

In this regard, services that can be easily recalled include Bancor, Barnbridge and Alchemix.

Alchemix

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Alchemix is a lending protocol where loans are repaid automatically as a result of the collateral deposited by users being routed by the network to Yearn vaults where yields are earned and automatically used to settle the debts incurred on the loans

The network has been made to function in a set-and-forget manner through the application of the ChainLink Keepers. So, users can now obtain DeFi loans, earn yields on their loans and the loans would be paid back automatically without them having to make any input manually since the network has been automated with ChainLink Keepers.

5- Connecting Smart Contracts To Real-world Events And Data

In the ChainLink protocol real world events and data can now be connected to smart contracts automated on blockchains. This is made possible with the use of a network of oracles which are decentralized and which make it possible for developers to easily connect smart contracts to any data resource or computation needed from off-chain sources.

The chain link protocol has the ability to successfully link with external API and this helps it to carry out computations off-chain which gives it a wide variety of applicable uses. This is the interesting use of the ChainLink by Arbol in gathering weather data which helps it in creating risk products of weather conditions. Equally, the ChainLink project is leveraged by the Theta Network in fighting ad fraud from viewership data in their dissemination of online content.

OpenLaw

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The OpenLaw network now makes use of the ChainLink protocol as a way of leveraging real-world information into automated smart contracts on the protocol. For instance, if a party to an agreement agrees to pay $20,000 every month through an agreement reached on the OpenLaw protocol, ChainLink oracle would be used every month to convert this agreement with the prevailing least exchange rate and payments would be made in Ether to the other party.

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4- Future development and associated projects. (Screenshots needed)

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In this section I am going to briefly explain three important future development plans and upcoming projects of the ChainLink network g. Interestingly, there are a lot of associated projects to the network some of which I have already explained in the preceding section.

Upcoming Or Future Projects

A- Integration of Link on SOL:-

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This event is slated to be held on the 31st of December 2021 or before that time. The Solana Mainnet Beta is slated to launch ChainLink on its platform. With the ChainLink price feeds having gone live on the Solana Devnet, the mainnet integration is expected in the fourth quarter of 2021. This will enable developers to build industry-standard, high quality, tamper-resistant oracle networks with greater efficiency to leverage off-chain data.

The CEO of the Solana Labs, Anatoly Yakovenko, and the Head of Integration in the ChainLink Labs, Johann Eid, in a chat at the Smart on held this year believe that this would:

  • Create network effects where the best technologies converge to produce maximum benefits for blockchain users in the underlying project
  • Attract a lot of experienced and expert next-gen developers into the Solana project
  • Lift critical barriers and take the project a bit further in its advancement

B- Integration of Link on DEC Explorer:-

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Chain link plans to integrate ITS services on the gyc explorer by 35 December 2021 or before then. This would make transactions on ChainLink and TomoChain carried out with Decentr to display on the explorer. This reduces stress for users who may have otherwise had to move back and forwards across different explorers but who can now simply access both the TomoChain and ChainLink from a single user interface of the Decentr.

Consequently, users of TomoChain can benefit from the PDV of the Decentr ecosystem where developers of decentralized applications who function on the TomoChain can simply utilise the PDV of Decentr network to access Social Reputation and carry out DeFi Lending. The bridge of the PDV as a reputation score is to be carried out with the integration of ChainLink which carries, through its oracle nodes, the connection to any other blockchain environment.

C- The ChainLink Fall 2021 Hackathon:-

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Another very much anticipated upcoming developmental project of the ChainLink protocol is The ChainLink 2021 Hackathon which is slated to kick off from tomorrow the 22nd of October till the 28 of November 2021. In this event there is going to be a lot of collaborative effort in computer and internet programming with a very large number of participants from across the world.

Interestingly, this is to be the biggest ever and attending would give one the opportunity to meet a lot of expert artists, industry-leading mentors, developers and creators from different blockchain ecosystems to rub minds in the development of next-gen hybrid smart contracts.

One can find a lot of reasons to register for this event, vis-a-vis:-

  • A total pool of $525k prices to be won
  • Participation in world class workshops that would be hosted by blockchain experts
  • Opportunity to pitch projects to leading, important and interesting venture capitals
  • Opportunity to connect with community members and developers of like
  • Opportunity to learn as a newcomer and grow very rapidly in the blockchain space

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5- Make a technical analysis of the token of the selected platform, then through your validated exchange account make the purchase of the token (15 USD as a minimum). Screenshots and an explanation of the procedure are required.

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First of all,

Is ChainLink Worth Investing In?

Considering such cryptos as the Link token, two major strengths can be weighted when evaluating its future potentials. To start with, the intrinsic value of the Link token is woven into how the ChainLink platform itself performs. Faster transactions and better speed now means that the world is gradually translating from revolving around legacy systems to such blockchain ecosystems like the Bitcoin and Ethereum networks which offer trustlessness. Obviously, this comes with an increased demand for tokens which are based on the blockchain.

Looking at the performance of the Link token from its inception one would not help but note that in 2017 September when it was launched, it was valued at $0.19. By August, 2020 a token was valued at over $19.59 reflecting an over 10,000% increase in just about three years. Currently, the price sits around $27.45. If more traction should be gained by the project in the future, then the Link token can be expected to hit as high as anyone could care to imagine. So, it is worth investing in, especially when looking at the strength that has been gained by the underlying project in recent years.

Since I intend to make the investment over a very long period of time, possibly up to two or three years, I decided to use the one week time frame to study the LINK/USDT price chart.

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LINK/USDT price chart
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From the price chart, a Cup and Handle chart pattern has been formed. This portends a bullish continuation pattern. There is a momentary bearish market sentiment which is expected to preceed a continuation of the overall bullish trend.

The cup looks like a rounding bottom which usually portends a likely temporary retracement. The handle itself looks like a wedge since it is confined within two parallel lines. Eventually, the asset is expected to continue in the overall bullish trend and a strong bullish candle seems to be forming already.

In order to make the investment, I have to first of all login to my verified Binance Exchange account.

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  • So, I input my details and click login

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  • I received a verification code with which I passed the verification stage

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  • Once I was logged in on the platform, I clicked Trade and selected Classic

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  • On the trading platform, I clicked on the currency selector and searched for LINK/USDT pair and selected it

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  • From the trading panel, I opt to buy 0.57 Link tokens at 28.61 USDT with the limit buy option

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  • This order is filled and is displayed below the trade history panel

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  • Actually, I intend to hold the coin for a very long time provided it keeps going up. However, knowing that cryptos can be highly volatile I set a stop loss at 27.03(6.01 % risk) in case the price begins to go down. Equally, I set a take profit at 31.70(10.84% reward). I would simply move up my stop loss to the take profit level when the price moves higher.

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CONCLUSION

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The ChainLink protocol was founded with the intention of using it to breach the gap between blockchain technology and traditional legacy technology. This would be instrumental in leveraging off-chain data sources for on-chain smart contracts to improve functionality of different projects being hosted on the blockchain ecosystem. So, the ChainLink protocol uses an ability to select the necessary oracles to report the needed real-world data through an aggregation of results.

The oracles of the ChainLink blockchain which undertake this function are improved to work in a very reliable and trustworthy manner and this makes it possible for it to recognise unreliable and disreputable nodes and disregard dishonest information from such sources. This improves the results from such nodes and extends the use cases for the protocol to include financial data management in legacy technologies.

There are a lot of other interesting use cases for the technology and a good number of upcoming developmental projects are already in view including the ChainLink Fall 2021 Hackathon that will be starting off tomorrow.

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Hello @bukkyi4u Thank you for participating in Steemit Crypto Academy season 4 week 7.

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Homework task: 9

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Congratulations my friend, excellent work. Very clean and above all very detailed.

You made me remember the class I taught last season about this Oracle.

Regarding the content I have nothing to add.

The only bad thing is that as far as I can see lately you have only made withdrawals and have not made Power Up, so you do not qualify to receive the additional point for supporting the #club5050 initiative.