Blockchains are worlds unto themselves, and as such, there is no way they can easily reach out to the outside world to pull in data that is needed, like real-time price feeds (like stocks, commodities as well as cryptocurrency rates), election results, sports stats, weather forecasts, and more.
To get that data on the blockchain, solutions called “Oracles” were developed. These are third party applications that provide this information to smart contracts for use in all manner of DeFi and other applications.
Chainlink is by far the largest and most trusted decentralized oracle network in the blockchain ecosystem. They do a lot more than provide price feeds to blockchain DeFi apps. The idea is to provide robust data feeds and information to web 3 Dapps so just about anything could be built on the blockchain.
Beyond DeFi and Price Feeds… Expanding the Dapp Ecosystem
Here are some things that are possible through Chainlink’s current services beyond price feeds that smart contracts can leverage:
1. Weather Data Feeds. Imagine an insurance product where the “middleman” and their human interpretations can deny claims being replaced by a decentralized app such as: Parametric insurance. This is a relatively new solution to protect against unpredictable catastrophic events by guaranteeing a direct payout in response to a predefined “triggering event” using third party data measuring wind, rainfall, sea levels, etc. For example, once the sea level rises above a predetermined threshold, it would trigger a direct payment to the policyholder without the need for the traditional claims process. This sort of smart contract Dapp leverages blockchain, machine learning and artificial intelligence (AI) to make coverage as simple, transparent and accessible as possible.
2. Dapps that require a verifiable and tamper-proof random function. Blockchain apps on their own cannot create this. What does having this unlock? It’s necessary for any app that relies on unpredictable outcomes. Examples include: unpredictable gaming outcomes ensuring that when NFTs are generated, they are created with random attributes, randomly assigning duties and resources – like assigning judges to cases, or randomly selecting winners from a pool, or fairly selecting participants to receive exclusive highly sought-after tickets to an event.
3. Imagine being able to connect a smart contract to ANY existing API in another application. If you need sports data to settle prediction data for a betting application, or verifying information entered into a Dapp through a specific system – limiting access or results returned to those who are permitted access to the data that resides in an external off-chain application or data store. The sky’s the limit!
4. Dapps also need to have daemon functions – where processes are run on a regular basis or based on a specific event. Smart contracts “sleep” by default, so a function is needed that will wake them up to process information. The nodes that make this possible are labeled “Keepers” and some examples include liquidating under collateralized loans on money markets, rebasing the supply of algorithmic stable coins once a day, settling futures contracts at expiry, harvesting yield for a yield aggregator, and so many more that are outside the DeFi world specifically.
5. Do you want a Dapp that could work across different blockchain platforms? Having a blockchain agnostic capability may be important. Enter the abstraction layer middleware for enterprises. This allows for the integration to be written once, and then modified for specific blockchains as needed – limiting the exposure to writing individual integrations to each blockchain.
And that brings up the viability of using the middleware layer built and proven for delivering Oracle services and real-world data, to act as a cross-chain bridge platform as well. Chainlink is available on many blockchains, so they’ve already built the ability to deliver cross-chain data. Enter Cross-Chain Interoperability Protocol (CCIP). Introduced by Chainlink in April 2021.
Leveraging the Decentralized Oracle Network
Given the theft (over $2 billion as of this writing, and explored in an earlier blog post) on cross-chain bridges, could adopting this sort of an approach be a safer and less-risky alternative for cross-chain communication and bridging of assets?
Chainlink nodes themselves are decentralized, and more nodes are being added to their Decentralized Oracle Networks (DONs). The recent announcement, at the end of September 2022, to support staking will help secure the Chainlink network from attack, as they expand the services they offer Dapp developers.
Limiting integration development to a proven decentralized network may limit the exposure to bugs – and enhance ease of maintenance over time. If such a decentralized network can maintain a “hack free” and “theft free” reality – building Dapps would be a lot more straight-forward.
One Step At A Time – A Model For User Adoption
The model and pathway they’ve taken to build their infrastructure has been one that starts with relatively little “at stake”. Rather than starting with cross-chain bridging, which this year has proven to be a juicy target for theft, Chainlink started with providing off-chain data much needed to build robust Dapps. I liken this to how Apple took over the mobile phone world. It all started with “1000 songs in your pocket” with their iPod. Anyone (and yes I was one) who had a Palm Pilot, could take one look at the iPod and see where Apple was headed. But rather than take on the super competitive mobile phone market, dominated then by the likes of Nokia and RIM, they did something seemingly unrelated – and built from there, building out iOS and their app infrastructure, proving it out while just offering a place to store your music, and have it be accessible easily.
Testing and proving out technology and apps with less risky use cases can be a great way to iterate and incrementally improve and add to capabilities – something that will benefit increasing user adoption on Blockchain. We need more than DeFi apps and high profile million dollar exploits, or twenty-something hubris that misuses funds because they think they cannot fail – until they do. That hubris and lack of humility threatens the entire future of building out a truly amazing blockchain infrastructure that could benefit so many people around the globe.
Trust takes awhile to build and can be dashed in an instant. This year, blockchain has had more than its share of trust-destroying events. It’s time to put our house in order, and start thinking differently about how Dapps are built and deployed – with an emphasis on user adoption that makes it easier and less risky to participate in the promise of blockchain.
At AktaryTech, we take blockchain development seriously — while having fun building innovative Dapps with our customers. If you’ve got an Dapp, or need smart and thoughtful developers to help build out or extend your project, reach out! We’d love to engage and explore what might be possible.