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Chainlink In 2024: Building The Foundation For A Global Internet Of Contracts With CCIP

In a new video outlining Chainlink’s 2024 outlook, Chainlink co-founder Sergey Nazarov detailed the distinct elements that make Chainlink’s Cross-Chain Interoperability Protocol (CCIP) a superior cross-chain solution capable of uniting TradFi and DeFi into a global internet of contracts

The Chainlink platform comprises more than a thousand bespoke decentralized oracle networks, each providing a unique “microservice” in the form of decentralized data provision or computation.

“The Chainlink Network is now so good at generating these decentralized microservices in the thousands that you can now generate a decentralized microservice made up of multiple networks,” Nazarov explained.

Whereas other bridges rely on a single network, CCIP achieves the highest level of cross-chain security by utilizing multiple decentralized networks to secure a single cross-chain transaction.

One of CCIP’s defining features is a separate Risk Management Network that provides an additional layer of security by independently examining cross-chain functions for errors and outliers.

“Risk management is actually the name of the game for moving value, moving valuable sensitive information,” Nazarov said. He described CCIP’s Risk Management Network as the “smart” part of the system, through which various risk parameters can be continuously defined and redefined to protect against evolving risks. This capability, in Nazarov’s view, is what makes CCIP an ideal cross-chain solution for traditional finance.

“Systems that move valuable, sensitive information don’t just send all the information to places they don’t understand, and places that they can’t verify the security of, that they can’t understand what the consequences will be,” he explained. “This is how all systems that move value work today: they require a deeper understanding of what they’re doing in order not to lose value, in order not to do the wrong thing.”

In addition to providing the level of security required by banks and asset managers, CCIP allows traditional financial institutions to transact with a range of public and private blockchains using their existing infrastructure, as demonstrated by Swift’s 2023 collaboration with over a dozen top financial institutions.

“You have all of these other properties of what would allow a cross-chain transaction to happen securely and reliably and in a way where banks and asset managers and the rest of the world could use them,” Nazarov said. “This, I think, will be one of the key defining properties of CCIP that allow this connectivity to happen, and it’ll have the greatest amount of counterparties; it’ll have the most banks, most asset managers, most systems, in my opinion, because it can facilitate a proper transaction with those systems.”

By upholding both the security required to process trillions of dollars in transactional throughput and the flexibility to adapt to changing legal, security, and reliability requirements of various counterparties, Nazarov believes CCIP will become a global cross-chain standard for a single internet of contracts.

“We have basically said, ‘Let’s build a cross-chain system the secure, proper way to manage all these risks, to create real security, and to allow rapid adoption into a single global internet of contracts in an open-source, global, community-driven way,’” he said. “And that is, I think, a very big difference.”

Watch the full video.

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