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Ethereum Co-Founder Vitalik Buterin On Why Smart Contracts Need Oracles

Last month, Chainlink Co-founder Sergey Nazarov sat down with AI researcher Lex Fridman to discuss the nuts and bolts of hybrid smart contracts outlined in the Chainlink 2.0 whitepaper. Highlights from the nearly three-hour conversation include thoughts on how hybrid smart contracts eliminate ambiguity, solve essential trust issues and execute agreements based on definitive truth.

During his most recent conversation with Vitalik Buterin, published last week, Fridman built on his conversation with Nazarov by asking the Ethereum co-founder about his thoughts on Chainlink and hybrid smart contracts that utilize off-chain external data sources. 

“I think it’s definitely necessary for smart contracts that do a lot of things to use off-chain data of some kind,” Buterin said. He listed several prominent use cases for hybrid smart contracts that integrate Chainlink’s decentralized oracle networks (DONs) to bring highly-reliable real-world data on-chain, such as stable assets that rely on price oracles and blockchain-based crop insurance utilizing weather data to protect livelihoods in developing economies – notably Etherisc, which integrated Chainlink DONs to deliver crop insurance in Kenya.

“You need some kind of oracle to tell you, ‘Did it actually rain in this particular area?’ If you want to have assets that mirror other financial assets, you need an oracle. If you want a prediction market, you need an oracle.” 

Buterin mentioned projects that have historically taken a different approach to oracles, such as global prediction platform Augur, which uses a human-based oracle. Recently, the new Augur Turbo platform integrated Chainlink DONs to bring secure data feeds and immediate settlement to its global sports prediction markets.

During a launch day appearance on CoinDesk TV’s First Mover, Augur’s Director of Operations, Tom Kysar, explained how Turbo’s integration with Chainlink solves the cost, speed and user experience issues of Augur v2’s manual, human-based oracle, saying, “It was the definition of manual. And today we can use Chainlink, which comes in automatically.”

Rounding out the interview segment about hybrid smart contracts, Buterin told Fridman, “Projects that provide oracles are definitely really important. I think Chainlink is definitely taking a good, important part of the oracle design space. I’m definitely happy that there’s that project taking the task on.” 

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Watch Lex Fridman’s full conversation with Sergey Nazarov.

Watch Lex Fridman’s full conversation with Vitalik Buterin.

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