A new report from the World Economic Forum estimates that $866.9 trillion could eventually be transferred from traditional financial markets to blockchain-based decentralized finance (DeFi), whose current TVL is over $80 billion. Driving this exponential growth is the evolution of more advanced hybrid smart contracts utilizing external data sources and storage systems to form the building blocks of Web 3.0.
Chainlink’s decentralized oracle networks (DONs) and Filecoin’s decentralized storage protocol are two essential projects scaling Web 3.0 adoption by a widening range of industries. At last week’s 2021 Ethereal Virtual Summit, Chainlink Co-Founder Sergey Nazarov and CEO of Protocol Labs (creator of Filecoin) Juan Benet joined Decrypt’s Adriana Hamacher to discuss new use cases and applications driving DeFi’s mass adoption.
Many of these innovative applications leveraging Chainlink’s DONs and Filecoin’s storage – including certificates for learning systems, NFT games and insurance contracts for miners – were born at the Spring 2021 Chainlink Hackathon. “What you’re seeing is really the evolution of this decentralized stack into configurable easy-to-build-with things,” Nazarov said.
As blockchains execute more transactions, there’s a growing volume of data that needs decentralized storage. Nazarov explained how oracle networks enable decentralized storage and long-term, cost-efficient persistence of data after a decentralized service has performed its operations and a smart contract has settled. “All of that computation doesn’t necessarily have to happen on a blockchain and all of the data connected to that value doesn’t have to live persistently on a blockchain.”
Benet said the power of oracles and proofs of storage will revolutionize the preservation of important information. He pointed to critical government datasets that should be decentralized and accessible by everyone as a digital commons. “Once you have that information in oracles, then you can start writing all sorts of applications.”
Benet is particularly excited about the creation of data DAOs (decentralized autonomous organizations) that can curate and maintain collections of important data. “Tons of information right now is put on a few services who then choose to shut down and kick everyone out and ideally that shouldn’t happen anymore. All of this really valuable, important information should be able to verifiably stick around in the long-term.”
“It would be remiss to not mention NFTs,” Benet said when asked about DeFi’s big developments over the next year. He predicted that more decentralized data storage and DONs will lead to an explosion of video NFTs and eventually entire 3D worlds filled with dynamic and participatory NFTs. “I also can’t wait for the first generation of mainstream games whose items are NFTs and whose economies are blockchain-powered.”
Benet and Nazarov agreed that growing Web 3.0 from several hundred million users to billions of users is the industry’s next big challenge. “Things that enable broader scalability of services and applications – things like DONs, things like Filecoin – are going to help us reach those milestones,” Benet said. “I really look forward to a point where most of the applications that I use on a day-to-day basis are backed by decentralized services that I can trust because they’re verifiable.”
Nazarov affirmed his belief that DeFi’s TVL will include another zero within the next year. “If DeFi breaks a trillion in total value locked, then ignoring it will quite simply be impossible. And then once that becomes impossible, everybody will begin making a plan.”