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Is Chainlink Eco Friendly (Explained)

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Chainlink (LINK) is a highly innovative blockchain project launched in 2019. By design, blockchains are separated from the outside world, and that is where Chainlink seeks to bridge that gap.

Chainlink may be innovative but are its processes eco-friendly? What is its impact on the environment, and how does it compare to other popular crypto projects such as Bitcoin or Litecoin.

Read on to find out the answers to these and many more questions on Chainlink and its native token LINK.

Chainlink isn’t entirely eco-friendly. It works by recording all on-chain transactions to its host network, Ethereum, which isn’t currently eco-friendly because it uses the highly criticized proof of work (PoW) mining consensus mechanism, also used by Bitcoin.

Chainlink isn’t an independent blockchain with a decentralized network and a native cryptocurrency.

Since its launch, the project has expanded its bridge application to other blockchains, including Binance Smart Chain (BSC), Polygon (MATIC), Avalanche (AVAX), Harmony (ONE) and Arbitrum.

Also read: Is Solana Eco-friendly?

Mining impacts the environment negatively in the following ways:

  • It incentivizes miners to expend ever-increasing amounts of energy to solve arbitrary puzzles with no discernable real-world benefits;
  • Some mining algorithms use specialized hardware, which becomes useless once the machines become less productive and need replacement.

Thankfully, Ethereum core developers are working on upgrading the network from using mining as a consensus mechanism to staking, which will be more scalable, cheaper, and more compatible with the environment.

Also read: Is BNB eco-friendly?

Chainlink is the most popular data oracle in the blockchain world. Its primary purpose is to supply offline data to smart contracts on various blockchains.

Smart contracts are self-executing pieces of code, which can’t directly access information in the offline world. That’s why an oracle such as Chainlink is essential.

A few industries which rely on Chainlink include:

Decentralized finance (DeFi)

This is a recent use case for blockchain technology enabling financial services without intermediaries such as banks.

Chainlink is supplies offline data for DeFi protocols such as AAVE, Kava, Compound, Syntentix, Banco, Venus, among several others.

Insurance

The insurance industry is undergoing tech disruption, especially by blockchain. Several insurance protocols rely on Chainlink to supply offline data on insurance products such as flooding, weather, crop, flight and collateral, among others;

Enterprise

Businesses are using Chainlink as a bridge to access blockchain infrastructure for various purposes, including asset verification, supply chain, etc.

Chainlink is a blockchain token hosted on the popular Ethereum network and thus inherits the environmental credentials of its host network.

Ethereum isn’t very eco-friendly due to its use of mining as a way to achieve consensus as opposed to staking.

It relies on mining to introduce new coins into circulation and verify transactions.

The problem with mining is that it leads to a lot of energy wastage as miners are incentivized to dedicate ever more powerful machines to mine coins.

Thankfully, Chainlink has created other oracle bridges on Ethereum competing networks that are more environmentally friendly such as Polygon. Using Chainlink on these other platforms could be more eco-friendly.

Also read: Is Algorand eco-friendly?

Chainlink is creating a bridge to disrupt some of the most important industries such as insurance and financial services. Here are some of its advantages:

  • It’s a decentralized network with open membership for the node operators.
  • The network is hosted on Ethereum, a well-established smart contract platform with superior security features and a vibrant developer community.
  • It ensures cross-chain interoperability between various disparate blockchain networks.

Learn more: Is Terra Luna A Smart Contract Platform?

Because it’s hosted on Ethereum, Chainlink also inherits some of the negatives that ail the leading smart contract platform, including:

  • The project might not be eco-friendly at the moment.
  • Transaction fees can be costly.
  • The network is prone to be slow.

These drawbacks aren’t present on Chainlink’s alternative bridges such as Polygon and BSC.

No, it is not. At least not currently, although the situation might change once Chainlink’s host network – Ethereum – migrates from mining to staking. Then, Chainlink could be considered more eco-friendly, cheaper and much faster.

Bitcoin and the current implementation of Ethereum both use mining to achieve consensus, which is rather a resource-intensive and energy-consuming process as opposed to staking.

Unfortunately, Chainlink is not any more eco-friendly than Litecoin because their host network, Ethereum, uses the same consensus mechanism, i.e., proof of work mining.

Although the two networks use slight variations of the mining mechanism, the differences aren’t significant enough to separate their adverse effects on the environment.

Also read: Is Terra Luna Environmentally Friendly?

Final thoughts

Chainlink solves a significant challenge in the blockchain space, which could justify its considerable value in the marketplace. However, it has negative effects on the environment.

Despite its innovativeness, Chainlink isn’t eco-friendly in its current form as a token on the Ethereum blockchain, which uses mining as a consensus mechanism. However, once it transitions fully into a staking network, Chainlink could be considered more eco-friendly than it currently is.