At the 2022 South by Southwest (SXSW) film festival, Chainlink co-founder Sergey Nazarov joined Real Vision host Ash Bennington to shine a spotlight on how web3 is reinventing the way people form agreements. Nazarov detailed the shift from web2’s probabilistic, centralized system of agreements to web3’s system of deterministic, decentralized hybrid smart contracts powered by Chainlink oracles.
Building blockchain-based web3 applications with the same ease and efficiency of web2 requires interoperability between different blockchains in an increasingly multi-chain world. However, events like the recent $375 million Wormhole token bridge exploit illustrate how complex the cross-chain communication problem is to solve.
Nazarov explained how Chainlink approaches cross-chain interoperability as a matter of communication – not just token movement – between chains. He said the higher level idea behind Chainlink’s Cross-Chain Interoperability Protocol (CCIP) as a future-proof standard for cross-chain communication is analogous to the early internet’s global TCP/IP communication standard.
The Chainlink Network has enabled the explosive growth of decentralized finance (DeFi) by connecting blockchain-based smart contracts to highly accurate, tamper-proof, real-world financial data that blockchains cannot access on their own. During DeFi’s expansion from a TVL of $700 million in December 2019 to a TVL of more than $200 billion today, smart contracts secured by Chainlink have not lost any value in an adversarial manner.
“That is a track record that basically no other system of this kind has,” Nazarov said. He noted that the goal of CCIP is to apply the same Chainlink oracle network that secured over $75 billion in smart contracts at the end of 2021 to a communications standard that enables cross-chain smart contracts.
“That same capability will actually allow people to build smart contracts that are composed of multiple pieces of code on multiple different chains just like web applications consist of multiple pieces of code on multiple clouds,” he explained.
Nazarov sees CCIP as “one of the last big infrastructure hurdles” to clear before developers can create cross-chain smart contracts utilizing different blockchains optimized to perform particular tasks.
For crypto-native applications, CCIP will replicate the experience of building web2 applications like Uber that incorporate numerous different APIs. For enterprises, CCIP will serve as an abstraction layer that allows legacy infrastructure to seamlessly interface with different chains through one framework.
“This is where enterprises really benefit from our work,” Nazarov said. “We’re already working with many enterprises that we’re helping accelerate in their usage of DeFi, so that they can offer the access to DeFi that their user base asks for and in all likelihood will someday demand.”