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How Chainlink Aims To Unite DeFi, TradFi, And FMIs Into One Internet Of Contracts

On the latest episode of the Bell Curve podcast, Chainlink co-founder Sergey Nazarov joined host Mike Ippolito and Framework Ventures co-founders Vance Spencer and Michael Anderson to discuss key topics including the breadth and configurability of Chainlink’s security model and the path to creating a global cross-chain standard with CCIP. The ultimate goal, Nazarov explained, is for Chainlink to unite three distinct financial domains into one global internet of contracts.

DeFi

The process of building essential blockchain infrastructure begins in the world of web3. “You have great teams like GMX, Synthetix, and others that are building these cutting-edge things, and we’re working with all those teams and we’re trying to listen very closely to what it is that they’re trying to do in their applications,” Nazarov explained. For example, web3 pioneer GMX is generating initial use cases for Data Streams, Chainlink’s low-latency pull-based oracle solution.  

“The large benefit we have is that, in making all of those features and making them securely, we are able to prove that they work for real value in production,” he said. “That puts us significantly farther ahead of a lot of the enterprise blockchain companies which don’t deal with production. They don’t deal with a live system; they deal with an idea that they want to make a live system, but it’s going to take them three to four years to get through the process.”

While Chainlink employs a “very rapid customer development iterative process” with projects in the vast Chainlink ecosystem, it does so with an unwavering commitment to maintaining the highest degree of security.

“The goal here is not to release features that everyone wants, whenever they want them,” Nazarov said. “The goal is to release features that are secure enough to handle the purpose and the value that they’re meant for – and that is the thing that I think will float any infrastructure over time.”

TradFi

Nazarov estimates 80% of blockchain infrastructure and security features Chainlink builds for web3 are transferable to TradFi (traditional finance) and capital markets. At the same time, Chainlink aims to satisfy the remaining security requirements of the world’s largest asset managers, banks, and hedge funds that want to tokenize real-world assets such as private equity, carbon credits, real estate, money markets, and treasuries.

In Nazarov’s experience, TradFi’s interest in tokenized assets has grown dramatically over the past few years. 

“The big thing that has changed is that they now have dedicated digital asset teams,” he said. “These folks now have dedicated team members, dedicated budgets, dedicated plans, dedicated goals.” 

Chainlink’s goal is to unite TradFi and DeFi in what Nazarov envisions will be the world’s largest liquidity layer

“Our goal is not to kill everybody; our goal is to make everyone work together,” he said. “My job is to create a very flexible system together with a large community that can allow anyone who can provide value to participate in transactions.”

FMIs

The financial market infrastructure (FMI) world will also have a critical role to play in the future of onchain finance. Because FMIs process enormous value, they are “the slowest moving group” to interact with blockchains. “When you secure huge amounts of value, you really have to understand what you’re doing before you do it,” Nazarov explained. 

Last summer, Swift, the world’s biggest provider of secure financial messaging services, announced its successful proof of concept demonstrating how global financial institutions can transact with multiple blockchains using Swift’s private key infrastructure (PKI) and Chainlink’s Cross-Chain Interoperability Protocol (CCIP).

“There needs to be a global standard for how the financial market infrastructures of the world, how the central banks of the world, interact with each other and with chains, and that is a really kind of long game type of problem,” Nazarov explained. He said solving this problem is not only the ultimate goal of Chainlink, but also his life’s work.

“If I look back on my life, and I spent 20, 25, 30 years getting the whole world on a single efficient standard across chains, across FMIs, across all banks, across all startups, I know that I’ll be able to look back at that and be proud.”

Watch the full episode.

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