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How Chainlink Is Laying The Groundwork For DeFi

At last month’s 2021 Global DeFi Summit, the leading gathering of global DeFi experts, Chainlink Co-founder Sergey Nazarov joined Real Vision Crypto Editor Ash Bennington for a fireside chat about fulfilling the vision of Chainlink 2.0 and the evolution of decentralized oracle networks as the entire DeFi ecosystem moves toward the future.

Bennington began the conversation by asking Nazarov about the current state of play for DeFi and where the entire industry is heading.  

“I think it’s pretty much clear to the people in our industry that DeFi is a force that’s going to continue,” Nazarov said, noting the explosive growth of DeFi over the past year

Because DeFi allows users to earn interest on digital assets, Nazarov previously identified DeFi as the inevitable next step for banks and fintechs that already have custody of cryptocurrency. At SWIFT’s Smarter Securities event in June, Nazarov described a future where banks will need to interact with many different public, semi-public and private blockchains by integrating a secure middleware like Chainlink into their existing infrastructure.

Nazarov told Bennington, “I’ve seen a lot more interest from institutions and fintechs and banks about DeFi as an alternative or as a supplement to the existing infrastructure that they already provide their user base access to.” Over the past six to nine months, Nazarov said, DeFi has evolved from a concept that “wasn’t completely clear” to a cutting-edge race between various blockchains and layer-2s for the most composable DeFi applications.  

This process is accelerated as both demand for DeFi and its TVL continue to grow. 

“What you end up really seeing is a large composable web of multiple different DeFi protocols that act as interoperable services to each other and those interoperable services form a large global financial products system,” Nazarov said. 

Nazarov said the full realization of DeFi will be a global bank of hybrid smart contracts, where each hybrid smart contract defines a unique DeFi capability. Because DeFi is, as Nazarov put it, “the first large-scale widely adopted hybrid smart contract,” the ground floor of the entire DeFi ecosystem is enabled by Chainlink’s decentralized oracle networks (DONs), where each DON provides trust-minimized access to external data and services.   

“You need that data to meet the same high standards as the contract itself, and that requires validation, consensus, decentralized computation in the form of an oracle network,” Nazarov said. “Chainlink is the largest and most widely used decentralized oracle network and set of decentralized oracle networks enabling the majority of DeFi to operate and function correctly.”

Watch Sergey Nazarov’s fireside chat with Ash Bennington at the 2021 Global DeFi Summit.

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