Chainlink

Oracles are crucial for blockchain applications because the networks on which they reside are sealed environments. For example, the Ethereum network has no native way to interact with, or pull data from, the internet. If an application on that network needs to pull information from elsewhere — such as a perpetual futures DEX pulling the current price of gold, or a prediction market settling the outcome of a sports match — it relies on an oracle to bridge the gap.

Chainlink is the most prominent oracle protocol and one of the largest altcoins by market cap. It functions as a network of independent nodes, together generating data feeds that smart contracts can call for real-time information from external sources. To prevent manipulation of data feeds, Chainlink aggregates data reports from multiple nodes, each of which pulls from its own sources. It also implements mechanisms to punish erroneous or dishonest reporting.

The network’s native LINK token provides the incentive mechanism for these node operators. Operators must stake LINK as collateral before participating in the network, and are also paid in LINK tokens for their services.