LINK is Chainlink's native ERC-677 token (extension of ERC-20) that serves multiple critical functions:

Payment Mechanism:

• Users pay node operators in LINK tokens for data requests
• Fees incentivize honest behavior and high-quality data provision

Staking and Collateral:

• Node operators stake LINK tokens as collateral
• Staked tokens can be slashed for misbehavior
• Creates economic incentives for honest reporting

Network Security:

• Higher staked amounts increase network security
• Economic guarantees back oracle services

Example: When a DeFi protocol requests price data, it pays LINK tokens to the oracle network. Node operators who provide accurate data receive payments, while those who provide false data risk losing their staked LINK tokens.