By looking at the header on the chain.link web site, according to Chainlink itself its stated purpose is to: "connect your smart contract to the outside world. Chainlink's decentralized oracle network provides reliable, tamper-proof inputs and outputs for complex smart contracts on any blockchain." Well, if you are just an ordinary small investor like me, this tells you little. So let's see if I can put this into plain English what the Chainlink protocol is attempting to solve absent all the techno-babble.
What happens when a smart contract requires a concept or information from the outside world which is absent from the contract itself on the blockchain. This problem is one that is widely known as the 'Oracle Problem' and much has been written on this subject. Chainlink's goal is to solve the problem by providing a vehicle to connect smart contracts to the outside world's data pools. They accomplish this by allowing smart contracts to have sight of all important and relevant information necessary to complete the contract in a trustless manner. In essence, Chainlink's goal is to provide a gateway for smart contracts to interact with real world data.
The reason that there is no simple solution to the 'Oracle Problem' is the difficulty in making oracles completely trustless. Among other things, if you build a simple oracle to connect your smart contract to the outside world if your oracle fails the smart contract stops functioning. Also, other problems with a simple oracle include: the oracle could be providing false data; the oracle will work only with your smart contract thereby providing no system wide solution; your own reputation may be insufficient to certify oracle accuracy for auditors; and, if running your own oracle, there is present the incentive to give wrong data as the result would be more money pocketed to you.
Chainlink's solution is five fold: anyone can take part in the network and run their own oracles (decentralization of oracles); smart contract based data aggregation is performed on-chain; provision for support of any source of data - public, subscription based or private; giving the end user an idea of the quality of the oracles used (Reputation verification); and, imposition of a penalty/collateral system (LINK tokens are issued as collateral for a Chainlink oracle to accept a request and if the oracle provides bad or false data the tokens are forfeited thereby sullying the oracles reputation).
By providing the above solutions, Chainlink has provided the following beneficial results to the Blockchain smart contract system: a smart contract will always function because if one oracle fails Chainlink will automatically supply different oracles; multiple oracles are utilized to result in a consensus correct on-chain answer; every oracle has an on-chain reputation which may be verified by auditors; and, by the penalty/collateral system in place oracles have both the reputational and financial incentive to provide true and accurate data. But, most importantly in this regard, Chainlink has provided an unlimited practicality of use in that any connection for which it has developer support, Chainlink oracles can be used for any practical application in any smart contract.
In researching Chainlink, I found a ton of information available. However, I found most of this information highly involved and technical in nature. It is my hope that the foregoing provided you a simplified and understandable presentation of what Chainlink is providing to benefit Blockchain smart contracts.
I am merely an ordinary small investor who likes to share what I've learned. I am not in any way a financial advisor and as such, do your own research before investing. If you enjoyed this article please like it, comment and/or tip. Feedback is always welcome here.