Chainlink is a decentralized network of oracles that enables smart contracts to securely interact with real-world data and services outside blockchain networks. With Chainlink, the traditional systems that currently power modern economies can connect to the emerging blockchain industry to generate more security, efficiency, and transparency in business and social processes. - Chainlink

That quote can seem very idealistic. A simple way to understand the technology is Web2 data + Web3.

Chainlink is an intermediary between real-world data feeds and smart contracts. It allows developers to create new consumer applications using blockchain technology and external data feeds through hybrid Smart Contracts. A keyword mentioned in many of Chainlink's documentation is "high-quality data feeds".

Why do High-Quality Data Feeds matter?

Raw data can come in all forms. However, that doesn't mean it's advantageous to utilize the data in consumer applications or for internal company use cases. Raw data sets aren't reliable on their own, that's where we get introduced to the term Garbage In Garbage Out. It's best to understand this concept in the first layer from the image below.

However, the quality of the data often isn't discovered until Layer 4 when the data scientists, including AI and Machine Learning, are ingesting this data for products to serve users inside the company and end users or customers outside of the company.

A detailed perspective on the Garbage In Garbage Out Concept can be found from Towards Data Science on Medium.

This image is a simple depiction of the concept:

What about Chainlink?

Chainlink is an intermediary between real-world data feeds and smart contracts.

The company claims to be a "tamper-proof and highly available connection between all of the world's highest quality data feeds". That's a huge claim! What if that's correct? What does that unlock for innovation at the smart contract layer of blockchain technologies? Imagine the kinds of products that are available for blockchain applications.

How does Chainlink Work?

External Data can be connected to Smart Contracts. This is done through Oracles. However, The Oracle Problem exists. Chainlink addresses this issue through Decentralized Oracle Networks (DONs).

Existing Oracles:

Chainlink Decentralized Oracle Networks:

An example of real-world data and blockchain technology is the price of the US Dollar compared to Ethereum. This can be found on the ETH/USD price data feed:

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