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Blockchain technology has seen massive amounts of development over the past several years, which resulted in numerous new products. In addition to that, many products that were around for a while now only became popular and major trends in the last 2 years, such as DeFi, NFTs, metaverse, and alike.
The greater variety of products and services brought in wave after wave of new users, further pushing adoption. Of course, all of this is only possible thanks to smart contracts, which represent the technology used for developing all of the mentioned products. However, since blockchain technology lacks a direct connection to the off-chain world, it was necessary to find a way to deliver outside information to the blockchain.
Without this info, smart contracts in a lot of cases would not know when the terms of the contracts have been met, and what action to trigger. In search of ways to bring this crucial data to the blockchain, and to smart contracts, decentralized oracle networks were created.
What are decentralized oracle networks?
Decentralized oracle networks, or simply decentralized oracles, are groups of independent blockchain oracles that provide outside information to the blockchain. Each independent node (oracle) is used for independently retrieving data from various off-chain sources. Once it finds the data that the smart contracts require, it retrieves it, compares it to the data retrieved by other oracles, and after determining that it is valid, it sends it to the contract.
This data comes from various sources, such as various websites, servers, databases, and alike. Hardware oracles can even harness the data from the real world, using sensors and similar Internet of Things devices. So, if all the data matches when it is being compared, then it must be true, and safe for smart contracts to rely on it.
The first project to provide decentralized oracles was Chainlink (LINK), which is an Ethereum-based oracle network that has since been integrated with numerous development platforms and projects in the blockchain world.
However, additional oracles have been created since Chainlink went live, and so far, Band Protocol has grown to be one of the most reliable ones and Chainlink’s main competitor.
Chainlink is a project co-founded by Sergey Nazarov, who then also became the CEO at Chainlink Labs. Nazarov co-founded the project in 2017, presenting it as a blockchain abstraction layer that enables universally connected smart contracts.
Essentially, Chainlink uses a network of decentralized oracles to allow blockchains to securely interact with external data feeds, payment methods, and events. This provides the critical off-chain data needed by complex smart contracts to become the dominant form of digital agreement.
Chainlink’s network is driven by an open-source community of data providers, smart contract developers, node operators, security auditors, researchers, and more, who are constantly working to ensure that the project continues to run smoothly and that it will only retrieve the highest-quality data.
With many trusted partners, Chainlink rose to become a major player in the data-processing field, and one of the highest-ranking cryptocurrency projects.
About Band Protocol
Around two years after Chainlink was launched, in September 2019, another decentralized oracle network emerged, calling itself Band Protocol. Like Chainlink, Band originally launched on Ethereum’s network as an ERC-20 project. However, after some time, it decided to migrate to a different blockchain, which led it to Cosmos (ATOM) and its network.
Band Protocol functions as a cross-chain data oracle platform that can obtain real-world data and supply it to on-chain applications. Simultaneously, it can connect APIs to smart contracts in order to facilitate the exchange of information directly from the source.
By offering reputable and verifiable data from the real world, Band unlocks a number of use cases for developers to explore. With any type of data now available and capable of being included in the dApp (including weather, sports, random numbers, price feeds, and alike), the project has granted developers the opportunity to develop all kinds of different dApps dedicated to various purposes.
Chainlink vs Band Protocol
The biggest question now — and one that a lot of developers have to ask when planning the creation of their blockchain products, is which one of these is better, and which one should they use?
The first major difference between them is the fact that Chainlink is built on Ethereum, whereas Band Protocol decided to leave Ethereum and establish itself on Cosmos. This is important since different blockchains have different features, and are used for different kinds of projects. However, selecting which one you will use does not only depend on what kind of project you have but also on the speed and cost of obtaining data.
To explain this better, let’s say that you have a dApp whose smart contract communicates with Chainlink in order to receive external data- Sp. the dApp will be sent a request for information and pay for it with ETH, which will then be converted to LINK. This conversion has to happen because nodes are paid in LINK tokens for providing data, but this is also where the problem emerges.
You see, Ethereum has been known for a long time for its lack of scalability and low throughput, which results in long waiting periods, and even worse – the highest fees in the entire crypto industry. It has gotten to the point where many started leaving the blockchain for Ethereum alternatives to avoid this problem.
And, when it comes to dApps and smart contracts that require live data, Chainlink is not the best way to go about it.
How does Band Protocol compare?
On the other hand, you have Band Protocol, whose dApps, and therefore smart contracts, also require external data. The dApp will once again pay with ETH for this data to be received, and the ETH is then converted to the BAND token. The difference, however, is that this conversion doesn’t happen on Ethereum’s infrastructure but on Cosmos’ infrastructure.
Since Cosmos is extremely scalable in comparison to Ethereum, it can process transactions almost instantly, which means that there are no lengthy waiting periods, and therefore no network congestion and unnecessarily high gas fees.
Where to Buy Chainlink or Band Protocol?
Both Chainlink (LINK) and Band Protocol (BAND) are available to purchase on the following exchanges.
Uphold – This is one of the top exchanges for United States & UK residents that offers a wide range of cryptocurrencies. Germany & Netherlands are prohibited.
Uphold Disclaimer: Assets available on Uphold are subject to region. All investments and trading are risky and may result in the loss of capital. Cryptoassets are largely unregulated and are therefore not subject to protection.
Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry with over 9,000,000 users, and over $207 billion in quarterly trading volume.
The Kraken exchange offers trading access to over 190 countries including Australia, Canada, Europe, and is a top exchange for USA residents. (Excluding New York & Washington state).
With everything mentioned above, it is clear that Band Protocol has the upper hand when confronted with Chainlink. Chainlink is not without its benefits, of course where Band has efficiency and cost savings, Chainlink has security and data stability. However, in the end, it is likely that both oracle networks will thrive because they serve different kinds of dApps, using different models. DeFi, NFT, metaverse, and other projects that require oracle services come in all shapes and sizes, which means that they have different oracle requirements. Some projects might be able to afford to wait a bit longer to get the necessary information, so to them, Chainlink is still a good solution, while those that require speed can turn to Band.
Simply put — there is plenty of room for both oracles to live and work in the blockchain industry, although Chainlink is currently overpriced, while Band appears to be very undervalued at this time, so that might be something worth keeping an eye on in years to come.
Ali is a freelance writer covering the cryptocurrency markets and the blockchain industry. He has 8 years of experience writing about cryptocurrencies, technology, and trading. His work can be found in various high-profile investment sites including CCN, Capital.com, Bitcoinist, and NewsBTC.
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