Chainlink- Decentralized Oracle Network for Smart Contracts
In my last article, I wrote about how smart contracts on the Ethereum network have the potential to revolutionize legal agreements and international trade. Because Ethereum smart contracts are unchangeable and indestructible, the interested parties no longer need to trust each other to engage in business. The terms of the contract are pre-programmed and are guaranteed by code, instead of a slow and potentially biased international court system.
Once the benefits of smart contracts have been made clear, (2022?) corporations will be looking to integrate these contracts into their everyday workflow. However, smart contracts currently operate in a closed system; the only data that can be analyzed and manipulated are tokens on the Ethereum network. In order for smart contracts to analyze external API data or output a trigger for an external application, the smart contract requires something called an “oracle.” This oracle serves as a connector between the closed Ethereum network and data accessible via the internet.
There are centralized oracles available for use on the Ethereum network like Oraclize, but this creates a point of vulnerability in the smart contract’s workflow. Because the data accessed will likely be on another blockchain, like the hyperledger project, a centralized oracle would be comparatively prone to tampering and downtime. By accessing the blockchain through a network of thousands of decentralized oracles, the risk of tampering and downtime for the oracle on which the smart contracts rely can be reduced to an acceptably minuscule possibility. The Chainlink oracle is especially flexible; it can be used to import and export data from multiple or singular external blockchains of different protocols, such as Ethereum, Hyperledger, NEO., and potentially from EOS and Cardano when the mainnets are released. It can also integrate payments via the SWIFT banking network into the smart contracts, which is a big deal for businesses. Finally, Chainlink is expected to announce a partnership with Docusign, a PDF signature software. This would allow smart contracts to execute upon the reception of a digital signature!
The future is looking very bright for smart contracts and Chainlink. Be on the lookout for big announcements during SXSW this Spring. Please note that this is not financial advice and that I am biased, as I have a small position in Chainlink. Thanks for taking the time to read this post!