Chainlink: What it is and how it works

Chainlink is a decentralized oracle network that has been generating a lot of buzz in the crypto world lately. It presents itself as a sort of bridge that aims to unite blockchains with the real world through a reinterpretation of security systems.

Today, it is considered a reference standard for the on-chain finance sector, so much so that it has already established collaborations with industry leaders such as Swift, Mastercard, Fidelity, and UBS.

Want to learn more about Chainlink? And perhaps learn how to use it for trading? Then you’re in the right place. In this guide, we’ll reveal everything you need to know about it.

What is Chainlink

Chainlink began in September 2014, when Sergey Nazarov and Steve Ellis decided to found the company SmartContract.com. Nazarov’s goal was to create smart contracts capable of integrating external data.

After years of work, in 2017, Ellis and Nazarov, together with Professor Ari Juels of Cornell University, published a whitepaper introducing the concept of a decentralized oracle network. A few months later, an Initial Coin Offering (ICO) was launched, raising $32 million through the sale of the LINK token at a price of approximately $0.11.

In the years that followed, all efforts focused on creating a secure and fast infrastructure. The network went online on the Ethereum mainnet on June 1, 2019. A key moment was 2020, during the DeFi Summer, when Chainlink was chosen as the standard price feed provider for some major protocols such as Aave and Synthetix.

Another important step occurred in 2021, with the introduction of hybrid smart contracts, capable of combining on-chain code with off-chain computation. Finally, the launch of the Cross-Chain Interoperability Protocol occurred in July 2023, which now allows blockchain networks to be connected to traditional banking systems.

As of this writing, Chainlink has transformed from a startup to an institutional partner. It collaborates with the Swift network and banks such as UBS and BNY Mellon. After consolidating its Staking v0.2 system, it introduced the new Cubes reward systems to incentivize network security.

Even in terms of expansion, Chainlink is now integrated on Ethereum, on its Layer 2, and on non-EVM networks such as Aptos and Coinbase.

How does Chainlink work

But how does Chainlink work specifically? Basically, it can be considered a sort of universal translator and guarantor. It takes information from various sources and transforms it into data understandable by a blockchain, allowing it to then autonomously execute smart contracts.

Today, it is used, for example, in institutional finance and for tokenization by giants like UBS and J.P. Morgan. How? With the real-time settlement of trades between banks located in different countries.

It also remains a useful infrastructure for moving assets between different blockchain networks. Just in December 2025, Coinbase decided to make it its sole management system for over $7 billion in asset wrappers across various blockchains.

Among its other purposes is the so-called Proof of Reserve, i.e., the real-time verification of the physical reserves of stablecoins or digital assets. This prevents cases of fraud or financial insolvency.

Finally, Chainlink is very useful for automation and compliance. It can help automate insurance claims and manages all regulatory compliance within the digital asset code.

It is a highly secure system, as it is based on the principle of extreme decentralization. This means there is no point of failure, as data comes from a network of nodes and not from a single source.

Operators must lock LINK tokens, so if they provide false data and arrive late, they lose everything. There is also a Risk Management Network within the CCIP protocol, capable of monitoring cross-chain transactions to block any attempted attacks.

Finally, privacy technologies such as CRE (Chainlink Runtime Environment) are worth mentioning, which processes sensitive data without making it public on the blockchain.

The Advantages of Chainlink

Chainlink is one of the cornerstones of the entire global financial system. First and foremost, it’s reliable, with a network of independent nodes that eliminate the risk of single points of failure. Suffice it to say that, by 2025, this network will protect a total value exceeding $100 billion.

The same can be said for its interoperability, a huge advantage that—thanks to the CCIP protocol—allows data and value to be securely transferred between public and private blockchains, as well as legacy banking systems.

Finally, transparency with Proof of Reserve, which provides immediate on-chain verification guarantees on reserves.

To reach such an important position. Chainlink has built on a long series of innovations introduced over the years:

• Chainlink Runtime Environment: This orchestration infrastructure enables institutions to deploy smart contracts in a matter of days;
• Asset Tokenization: Chainlink is now partnering with major financial institutions to bring real-world assets on-chain;
• Confidential Compute: This innovation introduced reserved compute capacity, allowing smart contracts to process sensitive data without exposing it;
• High-Frequency Data Streams: Traditional price feeds have been optimized for derivatives markets and high-performance DeFi.

How to Use Chainlink

Chainlink can now be used for technical purposes by developers and for financial purposes by individual consumers and investors.

If you’re developing a decentralized app, Chainlink will help you connect it to the real world. How? With Data Feeds to get up-to-date market prices, with Proof of Reserve to prove that the issued tokens are backed by physical or bank reserves, and Chainlink Functions to connect the smart contract to any external API.

You can get started by accessing the official portal from this link. Avoid other sites, as you may encounter phishing (which is quite common in this field). If you want to move funds between blockchains, always remember to choose systems that specify the use of CCIP.

For users and investors, however, it’s possible to use the LINK token to take full advantage of Chainlink. We’re not talking about a simple speculative cryptocurrency, but rather what drives the network forward.

How does it work in detail? Today, you can lock LINK in the official staking pool to protect the network and receive rewards. In November 2025, a program was launched to earn Cubes, non-transferable points that can be allocated to various projects in exchange for native tokens.

If you already own assets on other blockchains, you can use bridges with Chainlink’s CCIP technology. LINK is currently available on all major exchanges, such as Coinbase, Binance, and Revolut.

How to trade with Chainlink

Trading with LINK, and therefore Chainlink, is actually quite simple. Or rather, the strategies and platforms are the same as those for other more well-known cryptocurrencies.

Going into detail, it’s first important to choose the right platform. Trading is possible on:

• Centralized exchanges
• Decentralized exchanges
• Brokers

Once this is done, it’s time to apply the right trading strategies. This is a general guide; for more specialized advice, we recommend contacting a financial advisor.

In general, it’s always a good idea to open and close positions within the same day to take advantage of short-term volatility. Alternatively, there’s the swing trading technique, which means holding positions open for days or weeks, based on trends and indicators.

As the year draws to a close, it’s important to proceed with fundamental analysis, monitoring news related to partnerships, CCIP adoption, and progress in RWA tokenization, all of which influence prices in the medium and long term.

Chainlink Price History

Since its inception, the price of Chainlink (and therefore of the LINK token) has undergone several significant fluctuations. Its all-time low was $0.1263 on September 23, 2017, then fluctuated below the $0.50 threshold for much of 2018.

With the birth of DeFi, the first growth occurred, particularly between 2019 and 2020. Between March and July 2019, the price exceeded $3, reaching over $16 in August 2020.

The all-time high was recorded shortly thereafter, on May 9, 2021, at $52.88. This figure occurred during the general bull run of the entire crypto market. Shortly thereafter, there was a sharp decline, fluctuating between $10 and $20 for much of 2022.

After a period of stability, the price rose again to $13 and $17 at the end of 2023, and is currently trading between $12.20 and $12.89. The last three months have seen a decline of about 50%.

Original article published on Money.it Italy. Original title: Chainlink, cos’è e come funziona