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Understanding the differences between Chainlink (LINK) and Ethereum (ETH) is less about evaluating competitors and more about learning how these networks have the potential to leverage each other's technologies. Ethereum has been a pioneering force in the market and has helped to usher in higher adoption. Chainlink is a concept that has the potential to improve Dapps across all networks. Here's everything you need to know about Chainlink and Ethereum.
What is Chainlink?
Many traders are surprised to learn that Chainlink has been in the market since 2014. At that time, the protocol went under another name, SmartContract.com. In 2017, the network changed its name to align with its new goals. The team launched an ICO (Initial Coin Offering) that secured $32 million for the project. This maneuver was then followed by a partnership with Google, which further expanded the network's validity and positioning.
Chainlink differs from its competitors and Ethereum in many ways. For one, Chainlink is a decentralized network of oracles. Oracles are off-chain sensors that are crucial to the operations of today's Dapps. Oracles can transfer data to and from the blockchain.
For example, you could have an oracle that transfers the title for a car to an owner automatically when payments are complete. Some oracles monitor the price of cryptocurrencies for DEXs (Decentralized Exchanges) and other Dapps. The possibilities are endless. There are even oracles that monitor the weather.
What is Ethereum?
Ethereum is one of the most recognized blockchains in the world. The network made a name for itself after entering the market in 2014. The network ushered in upgraded blockchain capabilities via the introduction of smart contract support. This strategy launched a new era in the sector with dapps becoming the primary purpose of many networks since.
Ethereum is the decentralized infrastructure that supports the Ether cryptocurrency. Ethereum's early entry into the market helped it to become the juggernaut it is today. The protocol dominates the market as the most popular DeFi and Dapp protocol in operation today.
What Problems Was Chainlink Built to Alleviate?
Chainlink seeks to eliminate the biggest problem facing oracles today, incorrect data. Oracles have grown to be an integral part of most major Dapps. These off-chain sensors serve a vital role in communicating timely information to protocols. Problems occur when oracles provide false or incorrect data to the blockchain. The immutable nature of these networks means that this information is not removable in many instances.
Chainlink created a decentralized network of oracles that can self-check and analyze data to ensure the correctness of the information. This system uses multiple oracles that cross-reference their input. The oracles that provide faulty data are penalized. Too many incorrect entries can lead to an oracle being removed from the network.
Another major problem that Chainlink helps to solve is interoperability. Blockchain networks work great alone but when they are integrated into legacy systems, they can be a real game changer for businesses and creators. The system provides a reliable oracle infrastructure that is open to anyone to use.
What Problems Was Ethereum Built to Alleviate?
Ethereum was built to improve blockchains' usability. It wasn't designed to compete against Bitcoin. It was created to provide a way for developers to leverage the security and reliability of the blockchain system. The network also improved on earlier blockchain's scalability. The network supports 15 tps compared to Bitcoin's 7 tps.
Ethereum helped to fight the growing centralization in the market. At the time, the Bitcoin mining sector was very centralized with large mining pools controlling the majority of the network's hash rate. Ethereum introduced a new PoW consensus mechanism that did away with the SHA-256 protocol and leveraged Scrypt. This change gave the network better performance and a lower carbon footprint.
Ethereum seeks to improve its sustainability with the ETH 2.0 upgrade. The change would transfer the network to a PoS protocol. This maneuver would eliminate miners. In a PoS network, stakers secure returns by staking their tokens in network wallets or pools. This approach is more inclusive, removes technical barriers, and costs less.
How Does Chainlink Work?
Chainlink leverages a host of proprietary technologies to provide users with a secure oracle experience. The Chainlink Reputation Contract is used to verify the authenticity of oracles. This system ranks each oracle based on its reliability, uptime, and participation level.
The Chainlink Order-Matching Contract is a critical component of the ecosystem. This protocol sends the Requesting Contract to the nodes. The system automatically includes how many nodes will be required and the type of nodes as part of this report. Next, nodes bid on the requests. Then, the Chainlink Aggregation Contract checks all the data gathered from the oracles. Incorrect information is reconciled and oracles are ranked based on their performance.
LINK is the main utility token used by the network. The system requires users to use LINK to pay for services and interact with the network. It’s also required to execute smart contracts. There are in total, 1,000,000,000 LINK set for issuance over the total life of the project.
How Does Ethereum Work?
Ethereum leverages a decentralized network of nodes that handle tasks such as transaction validations and smart contract execution. Ethereum miners validate blocks of transactions and add them to the ledger. For their efforts, they receive payment in the form of Ether (ETH).
Developers can leverage Ethereum tools to create immersive Dapps. Ethereum has been on the cutting edge of DeFi technology since day one. The protocol was also the first to introduce token standards to the market and DEXs. The ERC-20 token standard is used by hundreds of thousands of projects today.
How to Buy Chainlink (LINK) and Ethereum (ETH)
Currently, Chainlink (LINK) and Ethereum (ETH) are each available for 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: Terms Apply. Cryptoassets are highly volatile. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong..
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).
Chainlink Vs. Ethereum – Legends in the Market
Ethereum continues to improve its strategy and remains an innovative force in the market today. In comparison, Chainlink serves a vital niche that could improve the performance of all networks. As such, both of these protocols can work together to improve the entire market. In terms of the best to trade, both are worth considering as long-term holds.
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