Decentralized Finance has been continuously rising and growing, but it still has not been fully figured out by a lot of the commentators. The mechanisms and nuances are still to be discovered by most of them, and to be quite frank, they should hurry. The pace of innovation is impressive (and exhausting).
There are ongoing works and projects coming from all around the world, and we’re going to focus more on one solution, that (if it succeeds) could become something revolutionary. These are the ‘oracles’ for the Decentralized Finance world, which could enable experts to have access to the detailed real-time assets price.
So what is Chainlink doing in the middle of this?
Chainlink is among the companies that are active in this space, and really, it’s an interesting option for the investors. While some are looking for lucrative investment options, others are looking for ways to partner up with Chainlink’s innovators. They are also perceived as the ones with great expertise and are started to be regarded as great tutors for others.
Recently, a video has been by published by Chainlink, where we could hear Patrick Collins, the company’s Developer Advocate, speaking about Blockchain. You can see the whole, almost 6-minutes-long video on the Disruption Banking website, which we will link below.
Collins makes a valid point about how when Blockchain is using a single node to gather data, it actually becomes as useful as a regular, conventional contract. He even warns his listeners to never use (at any condition) an oracle that would be single centralized. This seems to represent his company’s approach perfectly, and we could hear more about it during the Chainlink’s Hackathon, where Collins speaks about how they strive to build a healthy-functioning, and technically advanced community.
Why is Chainlink so vital for the whole DeFi ecosystem?
There are of course a lot of layers to that question, but the most important one is how the company supplies the still-developing community with the data, including live prices. The likes of yearn.finance or Aave are using it to adjust the rates of borrowing and lending. They have also partnered up with Polkadot and Binance within the system, and with SWIFT, Intel and Google Cloud outside the blockchain world.
Chainlink got recognized for its solutions that really enhance the game, and by many they are considered the best among blockchain solutions providers. This is why a lot of companies decide to work with them. The Chainlink Labs’ Director of Community, Rory Piant, believes that the community is crucial in their endeavour. As he states, nobody would even know about what they are doing, if they had not had the community. And the reach of the Chainlink Ecosystem project is so wide, that it needs recognition to keep on developing, as it builds on the DeFi structures in multiple ways.
The Oracle Problem
So, the Oracle Problem touches every single blockchain that you can even think of. Whether it’s Ethereum, Polkadot, Bitcoin, Litecoin, and every other – they are struggling with it. This happens because the smart contracts really do not have any real data. Instead, what they need, are oracles, and we currently have two types of those.
Not that long ago, Ethereum has introduced smart contracts that are programmable. And the rising popularity of Decentralized Finance is partly happening because of the ability to accessing various data. And as the time flows, the data is getting richer and richer, and this only helps the whole DeFi to develop.
There are centralized oracles, that work separately as a single entity. They provide data coming from an external source to the smart contracts. And just like in the conventional finance, there is only a single node, which leaves the whole ‘construction’ vulnerable to the attacks. Of course there are different security features, but they are not as sufficient.
Should you want to read the already-mentioned, really comprehensive piece by Andy Samu, that was published on the Disruption Banking website, you should definitely use the following link: https://disruptionbanking.com/2021/07/05/defis-oracle-problem-with-chainlinkgod/.