As Chainlink is built on the Ethereum blockchain, it can often be confusing to understand the difference between them. Here are some key differences to help explain how the two work together.
Chainlink is a decentralised network of data providers for cryptocurrency networks that need data for their smart contracts. Ethereum is a blockchain platform that facilitates smart contracts which developers can use to build decentralised applications (dapps) and services.
The two have a collaborative relationship. LINK, Chainlink’s native token which is used to incentivise action by its network, is built on Ethereum using a smart contract. In turn, Chainlink allows Ethereum to integrate real-world data into the various smart contracts running on its network.
Without this data, it would be cut off from the real world. This means that the dapps and smart contracts that run on the Ethereum blockchain and others would be limited in their accessibility to a wider audience. If these systems want to open themselves up to wider adoption, some give and take is required.
Think of it like a car and an engine. Without the car, the engine is just a big lump of metal. Without the engine, you can probably get the car to move but it isn’t necessarily going to move at the speed you need from it.
Basically, Chainlink provides the link (get it?), between the worlds of blockchain and the centralised world and improves Ethereum’s usefulness to businesses and institutions looking to integrate blockchain technology.
