Chainlink: The Industry-Standard Web3 Services Platform

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March 28, 2022
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chainlink white paper

Some of the top tech companies like Google have also used Chainlink oracles solutions to source data from their off-chain cloud networks to on-chain blockchain platforms. Per an announcement today, the paper illustrates how DONs can be deployed in several use cases, especially creating decentralized metalayers that would lead to the optimization of “feature-rich” smart contracts applications. While I highly recommend you read the whitepaper in its entirety, this podcast will provide the essentials you need to grasp Chainlink 2.0’s fundamental advancements in oracle technologies.

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In terms of the significant features, the hybrid DONs will offer hybrid smart contracts and enhanced data feeds and VRF, Chainlink Keepers, Chainlink Fair Sequencing Services (FSS), and Chainlink decentralized identity. In addition, the concept of super-linear staking has also been introduced by the new white paper, which mandates that the resources of the attacker must be greater than the combined security deposit of the nodes of the decentralized oracle network to proceed further. Chainlink is a decentralized oracle network (DON) that allows smart contracts on different blockchain platforms to safely access off-chain data.

Welcome to the Chainlink Documentation

Abstract
Smart contracts are poised to revolutionize many industries by replacing the need for both traditional legal agreements and centrally automated digital agreements. Both performance verification and execution rely on manual actions from one of the contracting parties, or an automated system that programmatically retrieves and updates relevant changes. Unfortunately, because of their underlying consensus protocols, the blockchains on which smart contracts run cannot support native communication with external systems.

chainlink white paper

To empower a broad range of next-generation smart contract applications and use cases, Chainlink 2.0 focuses on oracle technology advances in seven key areas. The Chainlink 2.0 whitepaper seems to have been received well by the market, as LINK is up by an impresive 19.1% today and the token reached a new all-time high price at around $44. LINK currently has a market capitalization of $18.37 billion and sits in 9th place in the cryptocurrency rankings. In the past, the Paxos stablecoin operator has already implemented these smart contracts. However, the hybrid smart contracts from Chainlink will lead to the concept of Decentralized Oracle Networks (DON).

How Chainlink DONs Will Power DeFi and the Wider Smart Contract Economy

According to the vision outlined in the whitepaper, going forward, Chainlink plans to deploy the DONs to improve in seven key areas, such as scaling, confidentiality, trust-minimization, incentive-based security, transaction fairness, and reduction of network complexity. The Chainlink’s original whitepaper was initially designed to have DONs compute external data into a blockchain using a reliable approach. “Super-linear staking requires an attacker to have resources greater—specifically for Chainlink, quadratically greater—than the combined security deposits of all DON nodes in order to succeed,” excerpt of the announcement read. The Chainlink Community Grant will help support startups building blockchain-based solutions with UNICEF by offering funding, mentorship and access to Chainlink’s expertise. The grant’s big-picture goal is to accelerate blockchain as a force for good, especially in developing regions of the world where innovative blockchain solutions are needed most.

chainlink white paper

Thus, DONs within the Chainlink Network serve as a secure and flexible full-stack solution for the creation of hybrid smart contracts that rely on existing on-chain code and combine it with critical off-chain computations. These hybrid smart contracts enable decentralized applications to achieve major upgrades in scalability and confidentiality, both of which are key to large-scale blockchain adoption. This growth in value derives from both economies of scale—greater per-user cost efficiency as service volumes increase—and network effects—an increase of network utility as users adopt DONs more widely. As described in the whitepaper, atd coin we believe that the growth in network security driven by virtuous cycles in Chainlink staking mechanisms exemplifies larger patterns of growth that the Chainlink network can help bring about in an on-chain economy for decentralized services. One form of attack, freeloading, is discussed in other sections of the white paper, but the certification service is focused on different types of attacks, sybil and mirroring. A sybil attack is where an attacker would control multiple nodes in the ChainLink network, attempting to control enough so that their falsified answer would be accepted as the correct answer given to a smart contract.

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The practical uses of such a network will largely depend on what the users wish to do, but Chainlink expects a number of services to take priority. The idea behind the platform is to let the oracles compute a “fair” sequence of transactions that would minimize value extraction generated from front-running trades and other techniques. As Nazarov explained, blockchains don’t have a conception of time, which is part of the reason why ordering transactions fairly is difficult, and why oracle networks can help.

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Taking the game further, now the Chainlink has released its second white paper, dubbed Chainlink 2.0 Whitepaper. A new whitepaper just released by leading blockchain oracle service Chainlink lays the foundation for new capabilities for application and smart contract developers. The contract-upgrade service is an optional service that users of the ChainLink network can choose to utilize if they wish to have security updates applied to their smart contracts. If or when vulnerabilities are discovered, the contract-upgrade service would make a new smart contract based on the existing one, and migrate it along with its assignments to the upgraded contract. A flag (as an instruction of code) can be used to indicate use of the upgraded contract instead of the old one. All changes made by the contract-upgrade service would be visible on-chain and available for audit even before upgrading.

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Nazarov disclaimed that Chainlink is not attempting to replace existing blockchains or layer-two solutions. Its aim is to be a flexible, customizable solution to compute data, which could be used to scale existing decentralized applications or even just run rollup schemes and other layer-two solutions. Chainlink would offer the choice of consensus mechanisms and nodes to each individual user, who will choose the trust guarantees they need. The reputation system will also contain on-chain history which can be publicly referenced with a listing service (and other smart contracts). This is probably the part of the Security Section that most of us are familiar with, as it defines the majority of the factors in which individual nodes are rated on (except for the two in the previous section).

Chainlink is open-source technology that is collectively developed by a large community of developers, researchers, and users who share the goal of building Chainlink into a public good for the benefit of the entire blockchain ecosystem. Notably, the upgraded DONs in Chainlink’s vision 2.0 will be able to perform functions that ordinary blockchains cannot execute, like Chainlink’s Verifiable Randomness Function (VRF). Chainlink envisions redefining the functions of DONs from its initial design into a more advanced solution that is similar to layer-2 technology. It’s very interesting to analyze the concept proposed by Chainlink in its new whitepaper. The kind of functionalities that the organization is proposing is unique and can easily transform the scenario on several aspects. Specifically, in the segment of DeFi, NFTs, and staking, this can bring a sea change in how existing solutions work.

What Is Chainlink? A Beginner’s Guide

The certification service also introduces the need for off-chain audits of nodes to ensure that they comply with security standards. Finally, the security service will perform reviews of answers after they have been given to the smart contract to ensure that the data has not been falsified. The 2.0 whitepaper of the Chainlink proposes decentralized oracle networks (DONs) that can perform multiple tasks in an interoperable manner. The network can transfer the data bidirectionally and do the computations off-chain using a variety of consensus protocols. To keep the date up to date, DONs have the sync function, and for dispute settlements, features like enforcing and arbitrating are present. The Chainlink Network has achieved an expansive network effect through widespread adoption in the decentralized oracle market and is already securing billions in on-chain value.

  • According to the Chainlink team, decentralized oracle networks will see significant scalability improvements and will be able to provide their services with lower latency and higher throughput.
  • Specifically, in the segment of DeFi, NFTs, and staking, this can bring a sea change in how existing solutions work.
  • As described in the whitepaper, we believe that the growth in network security driven by virtuous cycles in Chainlink staking mechanisms exemplifies larger patterns of growth that the Chainlink network can help bring about in an on-chain economy for decentralized services.
  • This proposal would mean Chainlink generalizing its oracle network into a “meta-layer” of Decentralized Oracle Networks.
  • These hybrid smart contracts enable decentralized applications to achieve major upgrades in scalability and confidentiality, both of which are key to large-scale blockchain adoption.
  • We’re confident that Chainlink will enable smart contracts to take the next major leap in their evolution, powered by a hybrid on-chain/off-chain architecture.

However, instead of a constant network “ping” for each node, this uptime will be measured as nodes digitally sign their responses and send to other nodes (for off-chain aggregation). Correctness is measured by comparing the node’s responses to the responses provided by other nodes in a given assignment. So any deviation of the node’s response outside of what the average from all node responses returned for an assignment would negatively affect this rating. Availability and correctness of nodes will be visible on-chain, meaning node listing services will be able to display these statistics publicly about all nodes on the ChainLink network. The Chainlink co-founder clarified that the platform is not trying to re-invent the wheel. Over the last years, Chainlink has established itself as the Gold standard for sourcing data to the DeFi industry.

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