The importance of oracle platforms like Chainlink to smart contracts cannot be over-emphasized. Smart contracts are known as an advanced form of blockchain technology usage.
They bring trustlessness, reliability, and operational efficiency to contracts. While smart contracts are a massive innovation, they, however, find it difficult to connect to real-life events happening off-chain. This is one of the greatest limitations of employing decentralized technology for everyday use. This limitation substantiates the need for oracle platforms like Chainlink. Simply put, oracle platforms serve as a secure connecting bridge between smart contracts and off-chain data.
Chainlink is arguably the most widely-used oracle platform available today. The oracle platform boasts of securing billions of dollars across numerous smart contracts, blockchains, and other use cases. Known for its Sybil-resistant nodes, the platform stands out in the data oracle sphere.
Unlike most oracle platforms which consist of just one oracle network, Chainlink is an ecosystem made up of several decentralized oracle networks. Notably, these networks run in parallel and also operate independently.
Chainlink Decentralized Network
Some of Chainlink’s decentralized network includes:
- Verifiable Random Function (VRF)
- Modular External Adapters
- Pre-Built Decentralized Price Feeds
- Fair Sequencing Services
- DECO for privacy-preserving attestations of TLS web data
- Arbitrum Rollups
Chainlink Use Cases
Being able to access off-chain data opens up smart contracts and the entire blockchain ecosystem to a wide range of amazing functions. Chainlink discusses these interesting functions in an official blog post titled “77 Smart Contract Use Cases Enabled By Chainlink.”
The oracle platform further confirmed this announcement via Twitter.
The #Chainlink Network supports the creation of universally connected smart contracts that interact w/ a wide range of off-chain resources. To showcase the limitless possibilities, here are 77 smart contract use cases uniquely enabled by Chainlink oracles.https://t.co/V9XUBZZR79
— Chainlink – Official Channel (@chainlink) November 24, 2020
Decentralized Finance (DeFi)
DeFi is currently at the top of the list when it comes to the crypto space today. Interestingly, 2020 has been dubbed the year of DeFi as the sphere recorded over a 1000% increase in TVL in 2020 Q3 alone. The DeFi space is known for offering services ranging from lending to hedging to loan collateralization. However, the DeFi space will be incomplete without access to secure, reliable, and accurate off-chain data.
Stablecoins are crypto tokens pegged to valuable items. These items may range from fiat currencies like the USD, to precious metals and even cryptocurrencies. As the name implies, these tokens are less prone to volatility as compared to other forms of cryptocurrencies.
A major example of a decentralized stablecoin is the DeFiDollar. Interestingly, the stablecoin is backed by USDT, sUSD, USDC, and DAI. The token furthermore makes use of the Chainlink price oracle to accurately estimate the price of its underlying crypto assets.
Money markets, simply put, are smart contracts that connect lenders with borrowers. Lenders receive interest on their assets while borrowers have access to much-needed capital at reasonable interest rates. To successfully operate a money market, access to reliable price feeds has to be guaranteed. Aave is one of the money market platforms we have today, and it provides support for about 24 different cryptos. The platform, furthermore, makes use of Chainlink’s reliable price feeds.
Futures and Options Trading
This involves setting a buying or selling function at a predetermined time in the future. It is particularly useful when it comes to leverage and hedging positions.
Two major examples of a futures trading platform making use of Chainlink’s oracle is dYdX and MCDEX.
Options trading, on the other hand, provides users with the ability to sell or buy a particular crypto token at a later date. Auctus and FinNexus make use of Chainlink’s oracle for options trading.
Synthetic assets are a special class of financial derivatives. They provide interested users with access to assets like commodities and stocks. Interestingly, users do not need to physically own these assets to gain access to their prices. One major example of Synthetics is the Synthetix protocol.
Simply put, bonds are a financial commitment providing short-term capital through debt expected to be paid back at a later date.
Bonds have been in existence before the inception of decentralized technology. Conventional bond contracts are now being replaced by an automated smart contract using oracle platforms like Chainlink. They also provide important data like interest rates, fiat payments, debt scores, etc.
In recent times, tokenized real-world assets like stocks, etc. are taking a front seat. This remains one of the most outstanding use cases of both smart contracts and blockchain technology. They take real assets and provide them with global access, transparency, liquidity, and seamless transactions.
The DeFi Money Market (DMM) is a perfect example of real-world assets. Users can invest in real-world assets on this platform using mTokens.
Decentralized Exchange (DEXs)
Decentralized exchanges (DEXs) are trading platforms that facilitate seamless trade in cryptocurrencies. The platform is designed to exclude any form of centralized authority or the need to disclose a user’s personal information.
0x relayer Bamboo Relay makes use of Chainlink’s oracle to power its stop-loss functionality.
Automated Market Makers (AMMs) is also a type of decentralized exchange making use of on-chain liquidity to carry out asset swaps. A major example of an AMM is DODO.
Staking is a popular feature in the decentralized sphere. It requires users to lock up some crypto assets as collateral on a smart contract. Users who lock up assets receive rewards on their assets. AdEx is a staking platform that makes use of Chainlink’s price oracles.
This is a relatively new feature in the crypto (DeFi) space. It helps lock down liquidity while ensuring an equal distribution of a network’s governance token. Users who provide liquidity on the protocol receive a reward, most times in the form of the protocol’s governance token. Chainlink provides reliable oracles to both Plasm and StrongBlock DeFi protocols.
One very important use of smart contracts is in the payment sphere. While it is easier to facilitate crypto payments, the same cannot be said for fiat-based payments. Most businesses still do not find saving in crypto convenient, majorly due to price fluctuations. To facilitate crypto payments devoid of price fluctuations for businesses, smart contracts require the services of an oracle platform like Chainlink.
Chainlink also facilitates other forms of payments, including bank payments, retail payments, crypto payments, employee salaries, remittances, etc.
Blockchain Gaming and Randomness
Blockchain gaming and verifiable randomness are fast becoming a top-notch niche in the blockchain and DeFi space. Chainlink’s VRF is a source of secure and verifiable randomness quite important in today’s blockchain gaming ecosystem. State lotteries also need access to platforms able to provide trustless and verifiable randomness.
Evolution Land, Axie Infinity, and Ether Legends all make use of Chainlink’s VRF.
Recently the Colorado State Lottery disclosed plans to launch a hackathon using Chainlink’s VRF.
The insurance ecosystem is one of the oldest financial systems available today. It is also hoarded in a lot of misdemeanor and illegal practices. Smart contracts powered by Chainlink aim to shift this much-needed sphere to a more trustless process where contracts are immutable, verifiable, and all parties involved are accountable.
Types of smart contract-based insurance available today include life, health, home, flight, crop, reinsurance, marine, and car insurance.
Apart from the above-listed functions, Chainlink price oracles bring to life several other smart contract functions. They include:
- Credit default swaps
- Tokenized portfolio management
- Proof-of-reserve (wrapped cross-chain)
- Revenue sharing
- Hybrid cloud applications
- Privacy-preserving data queries
- On-chain transaction privacy
- Private off-chain computation
- Solidity computation
- Node-as-a-service (NaaS)
- External data for baseline protocol
- Baseline protocol infographic
- Supply chain (RFID tracking, IoT sensors)
- Utilities (energy, water, waste management)
- Authorization (E-sign, biometrics, credentials, KYC/AML, domain names)
- Smart contract audit results
- Account security (2FA)
- Intellectual property
- Government (regulation, voting)
- Deeds and certificates
- Cross-chain communication
- Fair participant selection
- Random mode selection
- Fair sequencing services
At the time of writing, LINK was trading at $13.96, with a market cap of $5,508,889,099 and a 24-hour trading volume of $979,916,179.
Find out more about Chainlink on the Altcoin Buzz YouTube channel.