Fundamentally, contracts define the terms and obligations for an exchange of value between two or more independent parties. Historically, a centralized arbitrator is usually required to verify if those terms and conditions are met. However, thanks to the advent of blockchain technology and smart contract applications, we can now replace centralized arbitrators with decentralized infrastructure, reducing counterparty risk and improving operational efficiency.
However, due to the consensus mechanisms of blockchains, smart contracts have no built-in capabilities for interacting with external resources like data providers and API services as a means of verifying the outcome of real-world events happening outside the blockchain. This creates what is known as the blockchain oracle problem and represents one of the greatest limitations to representing everyday contracts on the blockchain.
To overcome this lack of connectivity, smart contracts use oracles as middleware to retrieve external data inputs and push data outputs to external systems. Not only do oracles serve as a two-way bridge between smart contracts and the outside world, but they provide a security framework for protecting against any single point of failure such as data manipulation and downtime.
Chainlink is the most widely used decentralized oracle network, currently securing billions in USD value for live applications across numerous blockchains and use cases. Chainlink is not a single oracle network but an ecosystem consisting of numerous decentralized oracle networks running in parallel. Each oracle network can provide a multitude of oracle services without cross dependencies on other oracle networks, some of which include:
- Pre-Built Decentralized Price Feeds that can be quickly integrated into any DeFi application to obtain asset prices with full market coverage.
- A Verifiable Random Function (VRF) to access a provably fair and secure Random Number Generator (RNG) directly on-chain.
- Modular External Adapters to connect to any off-chain resource like premium data providers, web APIs, IoT sensors, bank payments, enterprise backends, other blockchains, and more.
- Various other oracle services such as Fair Sequencing Services for fair transaction ordering, DECO for privacy-preserving attestations of TLS web session data, Arbitrum Rollups for scalable off-chain Solidity computation, and more.
Ultimately, Chainlink provides the necessary developer tools required to construct any type of oracle network, such as using multiple data sources, multiple oracle nodes, various aggregation methods, payment penalties, reputation services, and visualization tools. This allows for a wide range of use cases to be developed, tested, and pushed into production.
Access to external data opens up a whole new wave of functionality for smart contracts. To inspire you with the limitless potential of universally connected smart contracts, we put together a list of 77 ways to use the Chainlink Network. If any of these ideas resonate with you or if you want to learn more, find us on Discord or Github, and check out our documentation to begin building universally connected smart contracts today.
- Decentralized Finance
- External Payments
- Gaming and Randomness
- Enterprise Systems
- Supply Chain
- Authorization and Identity
Read more: https://blog.chain.link/44-ways-to-enhance-your-smart-contract-with-chainlink/