What is Chainlink? A comprehensive explanation of the core logic of this Decentralized Finance infrastructure.

Question: Why can't the Blockchain obtain off-chain data?

Blockchain is like a computer without the internet - it can self-verify transactions, but it has no way to actively connect to the outside world to read real data. This is the famous “Oracle Problem”.

Imagine a smart contract that triggers liquidation automatically based on the BTC price, but how does it know how much BTC is worth right now? The prices on different exchanges are not the same. At this point, a “translator” is needed to accurately bring off-chain data onto the chain.

Why is Chainlink so popular?

Early projects used centralized oracles - which meant one service provider had the final say. But the problem is obvious:

• Single point of failure (service provider downtime, hacker attacks, or even malicious actions)
• The risk of data being tampered with
• User funds rely entirely on this one company not to be evil.

Chainlink's Solution: Establish a decentralized network of nodes. Multiple independent nodes bid for the same data request, and ultimately filter out “bad data” through majority voting. It's similar to Uber's dynamic pricing, but applied to data—whoever offers a reasonable price, has a good reputation, and sufficient collateral will win the order.

Operating Logic (Simplified Version)

1. Requester (such as a lending protocol): “I need the BTC price”
2. Chainlink Node: Received the task and started bidding.
3. Credit Contract: Check node history and filter out “deadbeats”.
4. Matching Contract: Select several reliable nodes to obtain data.
5. Aggregate Contract: Collect all answers, eliminate outliers, output the final price.
6. Payment: The requester pays the node fee with LINK tokens.

What is the LINK token used for?

• Payment Method: Users pay fees to node operators.
• Letter of Credit: Node pledges LINK as collateral, indicating “I mean business”
• Punishment Mechanism: Nodes that act maliciously will have their LINK confiscated.

The more collateral there is and the better the historical record of the node, the higher the probability of being selected and the more LINK earned. This creates a virtuous competition—nodes are incentivized to operate honestly.

How important is Chainlink now?

• The price feeds that support the entire DeFi ecosystem (lending, DEX, derivatives all rely on it)
• Application scope: weather data, sports event results, insurance claim trigger conditions, etc.
• The market cap once exceeded $21 billion, making it the most important infrastructure token after BTC/ETH.

Core Value: Chainlink does not solve a technical problem, but rather a trust issue. It enables smart contracts to securely and reliably access real-world data, which is the foundation for DeFi to handle hundreds of billions of dollars.