Blockchains were generally closed-off systems that rarely interacted with the outside world until the development of smart contracts.
The rise of smart contracts means that blockchains now have to interact not only with themselves but also with the outside world. Besides that, the crypto industry has faced the challenge of increased network costs and slower transactions for years.
That has led to several important innovative protocols to help crypto holders/traders experience the best with their native blockchains. One such protocol is Chainlink.
What is Chainlink?
Chainlink is an interoperable blockchain oracle network that works across compatible blockchains to facilitate the interaction between smart contracts on blockchains and external environments (outside factors).
Blockchains previously interacted with factors and conditions on their networks, but the rise of smart contracts has brought a new dimension to the way blockchains are deployed.
But today, smart contracts can now be triggered by external factors such as stock prices, weather refactors, and just about any other factor that is pre-set by the smart contract code. But this creates a problem; these factors may come from various sources and may then “confuse” the smart contract through faulty or imperfect information.
For smart contracts to reach their full potential, Chainlink deploys a network of oracles that independently verify external factors and only pass on the most secure ones to the smart contract.
Again, a new issue arises.
Blockchain Speed and Costs
Speed and transaction costs are important factors that users consider when entering into smart contracts. The Ethereum network, the first blockchain network to get smart contracts, is relatively slower than newer blockchain networks such as Solana, Cardano, and Binance Smart Chain (BSC).
Due to slow and congested network transactions, transaction costs can significantly increase when external protocols interact with them. But not Chainlink.
Chainlink is built to regularly update its live statistics at the current network speed and transaction costs of the parent blockchain. As a Layer 2 protocol, Chainlink is the protocol that facilitates smart contracts.
Developers can now build Layer 2 smart contracts using Chainlink and one other important tool: Arbitrum.
Arbitrum is a Layer 2 rollup on the Ethereum network that developers use to build on Ethereum. The Chainlink live price feed can provide external data for contracts built with Arbitrum. In this way, Chainlink Oracle Networks offers an innovative way for smart contracts to run at blockchain-native speed and cost. According to this tweet, Chainlink can now function at the speed and cost of any blockchain or Layer 2 protocol.