Chainlink (LINK -1.69%) is a decentralized blockchain oracle network. A blockchain oracle is a service that transfers real-world data to smart contracts (programs running on blockchains). Chainlink allows smart contracts to quickly and securely connect to data sources.

It's an important service, and it gives Chainlink a wide range of use cases across many different industries. Read our full Chainlink guide to learn more about how it works and why it's one of the best cryptocurrency investments.
What makes Chainlink unique?
The reason Chainlink is so useful is that it connects smart contracts on blockchains to real-world data and events.
Smart contracts are blockchain programs that self-execute when specific conditions are met. They're one of the most widely used blockchain tools, and blockchain platforms capable of running smart contracts are extremely popular. But they have a limitation referred to as the blockchain oracle problem. They can't interact with off-chain data or any information not on the blockchain.
Blockchain oracles solve that problem. An oracle is a bridge that brings a smart contract the data it needs. It's also important that the smart contract receives accurate data, and that's where the Chainlink Oracle Network comes in.
Chainlink is made up of various decentralized oracle networks. Each network consists of multiple blockchain oracles that retrieve and validate data. This allows smart contracts using Chainlink to get data from tens to hundreds of oracle nodes and aggregate the result instead of relying on a single oracle.
Beyond connecting smart contracts to data, Chainlink's ambitious version 2.0 expands its set of services to include connecting smart contracts with off-chain computation, payments, and events. With the expansion of off-chain functionality, Chainlink sees the evolution of a whole new class of "hybrid" smart contracts -- and with Chainlink nodes in the middle of it all.
Chainlink also cleverly expands its ecosystem by enabling data providers to sell their data directly to blockchain applications (on any blockchain) simply by connecting their application programming interface (API).
Where Chainlink came from
Sergey Nazarov, Steve Ellis, and Ari Juels published the original Chainlink white paper and began developing the project in September 2017. They also held an initial coin offering (ICO) that month, selling 350 million LINK tokens (35% of the total supply) and raising $32 million.
Chainlink launched its network in May 2019. The project is managed by a corporation registered in the Cayman Islands, Smartcontract Chainlink, Ltd., and the Chainlink Labs organization.
How Chainlink works
Although Chainlink is in a multi-year process of expanding its oracle features, the way it currently provides data to blockchain applications works like this: When a user needs off-chain data through Chainlink for their smart contract, they put out a request. The Chainlink protocol responds by creating a service-level agreement (SLA). The SLA includes three sub-contracts, each with its own function:
- Chainlink Reputation Contract: Reviews oracles' reputation scores and discards any that are unreliable.
- Chainlink Order-Matching Contract: Brings the request to oracles, takes bids, and selects the oracles that will handle the request.
- Chainlink Aggregating Contract: Receives that data from the oracles and validates it. For example, if most oracles provide one response, but two provide other information, it will discard the responses of those two oracles.
Chainlink isn't limited to oracles that are part of its network. It can also gather data from outside oracles using its Chainlink Core software and external adapters. Here's how they work:
- Chainlink Core: Reads the request and routes it to a Chainlink node.
- External Adapter: Connects the node with an external data source and translates requests from a blockchain programming language to a real-world programming language.
Users pay Chainlink node operators (which deliver off-chain data) in LINK tokens. Node operators set the prices for their services.
Chainlink nodes also need to stake LINK, meaning they lock up those tokens on the blockchain as collateral. The amount of LINK a node has staked is one factor in its reputation score. If a node is unreliable or dishonest, the Chainlink protocol taxes its LINK stake. This helps ensure that nodes provide accurate information.
How to buy Chainlink
Since Chainlink is one of the larger cryptocurrencies, there are plenty of exchanges that list it. Here are a few of the most popular places for U.S. investors to buy Chainlink:
If you already have an account on a different crypto exchange, check for Chainlink there first. It's widely available, so you may not need to go anywhere new to find it.
Chainlink is popular among cryptocurrency enthusiasts, and it's easy to see why. No cryptocurrency is a sure thing, but, with the features it offers, Chainlink clearly has the potential for long-term success.