If you had to describe Chainlink to someone in the most accurate and concise way possible, while encompassing the entirety of what Chainlink can offer, what would you say? While people newer to Chainlink may think of it simply as “a set of price feeds on Ethereum,” or even more broadly as “a way to transfer data from off-chain systems onto blockchains,” both of these definitions are far too limiting compared to the expansive capabilities of Chainlink. Describing Chainlink so simply is almost analogous to defining the internet as “a way to send mail digitally.” Such a definition does not remotely capture even a small portion of the internet’s full scope.
Chainlink Price Feeds on the Ethereum blockchain are indeed widely used, actively securing over $15B for the DeFi ecosystem, including leading projects like Aave and Synthetix. However, they are also only the tip of the iceberg of what Chainlink oracles are and will be used for. Just looking beyond the surface, we already see a multitude of Chainlink oracle functions – such as delivering data feeds beyond asset prices like weather information and the collateralization of tokenized assets, as well as forms of computation like Chainlink VRF (Verifiable Random Function) for minting provably rare NFTs and Chainlink Off-Chain Reporting (OCR) for off-chain data aggregation – live and in production.
There is a multitude of other Chainlink oracle services in development: bringing sensitive data on-chain in a confidential manner via DECO, generating on-chain contract and transaction privacy with Mixicles, connecting to fiat/crypto payments through external adapters, allowing enterprises to connect to any chain through a single blockchain abstraction layer, and much more.
Taking this all into account, what would the most complete definition of Chainlink look like from the perspective of Crypto___Oracle and ChainLinkGod? We created the following definition:
Chainlink is a single, generalized, open-source, permissionless, compute-enabled, blockchain-agnostic, API-agnostic, bi-directional, cryptoeconomically-secured connector of on-chain and off-chain systems, built upon a heterogeneous substrate that’s unbounded and without cross-dependencies, ultimately capable of catering to any and all oracle needs.
Yes, we get it; this is quite a dense explanation. However, we believe it presents the most technically precise and efficient description of Chainlink, with every word having a specific meaning without overlap. The definition is a mix of our own interpretations and a description given by Chainlink Labs’ Chief Scientist, Ari Juels.
In order to further the collective understanding of what Chainlink is and the true value it can provide to the world, we’ve broken down this definition into easily digestible pieces to showcase each of its unique properties.
Breaking Down Our Definition Of Chainlink
Single: Chainlink is a single protocol that supports anything and everything oracle-related, serving as a universal communication standard to provide connectivity between and among on-chain and off-chain systems, akin to the Hypertext Transfer Protocol (HTTP) that powers the World Wide Web.
Generalized: The Chainlink protocol is highly flexible (aka generalized) in that it can support any type of oracle design, such as oracle networks with varying degrees of decentralization, update frequency, node selection, data source quality, hardware requirements, privacy features, etc.
Open-source: Chainlink’s codebase, including the off-chain oracle node client and the on-chain smart contracts, is entirely open-source and publicly available under an MIT software license, allowing anyone to audit and improve it.
Permissionless: Chainlink is an entirely permissionless protocol, wherein any developer can launch their own Chainlink node and build their own oracle network without needing to ask permission from any centralized entity.
Compute-enabled: Chainlink oracles not only transfer data between disparate systems; they can also compute data off-chain in a trust-minimized manner before delivering it on-chain, such as generating verifiable randomness from a user-supplied seed, calculating an insurance quote using web/IoT data, or executing smart contracts via directly running Layer 2 validators for Arbitrum’s Rollup solution.
Blockchain-agnostic: Chainlink is not limited to a single blockchain network and can natively run on and/or interoperate with any smart contract platform, such as Ethereum, Polygon, xDai, BSC, Cosmos, Polkadot, Avalanche, Hyperledger, and more.
API-agnostic: Chainlink oracles can connect to any application programming interface (API) – the standard method of reading data from and writing data to an external system – including both free open APIs and premium authenticated APIs, meaning that all the world’s data and services – such as web data, professional data providers, IoT sensors, legacy databases, enterprise systems, traditional payment gateways, and other blockchains – can become accessible on any blockchain.
Bi-directional: Chainlink oracles can deliver off-chain data and computation results to on-chain contracts as well as relay instructions as smart contract outputs to off-chain systems, e.g. sending bank wire information to trigger a traditional payment system, biometric data to unlock an IoT-enabled safe, and various other methods of interacting with legacy systems and establishing cyber-physical connections.
Cryptoeconomically secured: Chainlink oracle networks are secured by economic incentives generated through its native LINK token, which include all oracles services – nodes being paid for in LINK, network rewards divvied out in LINK to node operators to bootstrap secure and lower-cost oracle services for users, implicit staking by nodes via financial exposure to LINK to prove their long-term commitment to the health of the Chainlink Network, and future explicit staking where nodes stake their LINK tokens in service agreements to back the quality of their oracle services, which can then be slashed for malicious behavior or poor performance.
Connector of on-chain and off-chain systems: Chainlink is a universal bridge between on-chain networks and off-chain systems, between different on-chain networks, and even between entirely off-chain systems.
Heterogeneous substrate: Unlike a blockchain, which is a monolithic network where all nodes perform the same standardized computation to achieve a common goal, Chainlink is a heterogeneous network where independent oracle nodes and networks run in parallel to one another to achieve their own specific goals.
Unbounded: An unlimited number of independent Chainlink nodes and oracle networks sharing a common heterogeneous substrate can run in parallel across various blockchains without any upper bound on the total number running at any one time, leading to unlimited horizontal scalability of the Chainlink Network as a whole.
Without cross-dependencies: All of the independent Chainlink oracle networks can run in parallel without reliance on each other; e.g., anyone can spin up an oracle network customized to their own parameters without worrying about the design limitations of other oracle networks.
Combining all the above descriptors, Chainlink provides smart contract developers with an all-encompassing, future-proof solution that can meet any and all oracle needs. Importantly, this is achieved without centralization and to the benefit of everyone, as it generates strong network effects that lead to a wider selection of data, API services, node operators, documentation and developer tooling, as well as powerful economies of scale, wherein projects can get the best quality data, the highest degree of decentralization, the most secure network of nodes, and the largest amount of cryptoeconomic security to secure their oracle requests, while only paying a fraction of the total cost.
With Chainlink being essentially synonymous with the term “oracle,” we feel this definition is what any properly designed oracle system capable of supporting advanced smart contract applications should embody. Any oracle network that does not meet all of the terms laid out in this definition is likely to be feature-limited, niche, and incapable of establishing a large network effect.
It’s important to note though that the definition laid out here is not static, as Chainlink and oracle development is not static. Over time, new oracle node functionalities will be created, advanced oracle network design patterns will emerge, and innovative use cases that stretch the very definition of Chainlink and the oracle functionalities it supports will take root.
If this definition resonates with you or you believe we have missed something important, please reach out and let us know.
SmartContent was founded by @Crypto___Oracle and @ChainLinkGod to break down the information asymmetry about Chainlink, smart contracts, and the Fourth Industrial Revolution. Follow @SmartContent777 on Twitter to stay up-to-date on the latest Chainlink, DeFi and blockchain news.