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How Chainlink Solves The Smart Contract Industry’s Chicken-And-Egg Problem

The decentralized oracle networks (DONs) outlined in the Chainlink 2.0 whitepaper will provide a more expansive set of services beyond data delivery. As thousands of DONs form a decentralized metalayer, more advanced hybrid smart contracts will utilize multiple DONs for different price feeds and other functions such as Proof of Reserve and verifiable randomness to achieve exciting new value for users. 

“We’re seeing multiple decentralized oracle networks used by a single contract more and more,” Chainlink Co-Founder Sergey Nazarov told host Matthew Diemer on a recent episode of The Decrypt Daily podcast. Nazarov explained the goal of DONs is to provide all of the decentralized services that Web 3.0 developers need.

“The dynamic we want to arrive at eventually is the same dynamic you see in the Web 2.0 world,” Nazarov said. In Web 2.0, developers only need to write core code, then integrate any number of external services in the form of APIs that allow them to build more advanced applications in a matter of days or even hours.

“Right now in the blockchain industry, that still takes weeks or months and we want to get it down to hours or days,” Nazarov said. “We want to put all of the decentralized services that a smart contract could ever need in this decentralized oracle network format and make it easily accessible and secure.”

As DONs are able to both secure greater value and provide increased breadth of services, Nazarov said they’ll establish a virtuous cycle that solves what he referred to as the smart contract industry’s “chicken-and-egg” problem.

“People can’t build the smart contracts that go on to define our industry until they have the decentralized service that allows the contract to do what it needs to do to provide value. And those decentralized services won’t really appear until there are smart contracts to consume them,” he said.

The metalayer model outlined in the Chainlink 2.0 whitepaper describes how a rapid increase in decentralized services will lead to more advanced hybrid smart contracts, which will then create a larger user base and market for more decentralized services. 

“An existing developer can symply connect his core code to a lot of existing decentralized services for anything from identity data, to credit score data, to weather data, to computations that need to be done in a decentralized oracle network because they either can’t be done on-chain or people don’t want to do them on-chain for privacy reasons,” Nazarov said.

A metalayer of DONs will provide all of the essential building blocks for Web 3.0 in a decentralized, secure, easy-to-consume format that allows developers to simply integrate a service without having to build their own infrastructure. Nazarov believes this will lead to more advanced DeFi and blockchain gaming, as well as entirely new, unforeseen categories of smart contracts. To illustrate what Web 3.0 will look like, he offered a compelling analogy to Web 2.0: “People weren’t able to foresee Uber until somebody made some core code and combined a few services around GPS location, messaging and payments into that service.” 

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