Completing The God Protocols: A Comprehensive Overview of Chainlink in 2021

Completing The God Protocols
Nick Szabo God Protocols Diagram
Nick Szabo’s original diagram in his first article on the subject titled The God Protocols.
The Chainlink Network
Chainlink connects any blockchain to any input and output.

PART 1: PRIMER ON BLOCKCHAINS, SMART CONTRACTS, AND ORACLES

Blockchain: The Physical Body / Decentralized Computer Network

Centralized versus decentralized transactions
Blockchains use a decentralized network to facilitate the exchange of value between parties without ever taking custody of the asset, whereas a bank takes custody conducting payments.
Bitcoin is distributed because all miners store and maintain a copy of the ledger. Bitcoin is also decentralized because if some nodes were to go offline, the Bitcoin blockchain will continue to function as normal. (source)
Blockchain
A blockchain is quite literally a chain of blocks connected through cryptographic hashes; (source).
Bitcoin nodes
The Bitcoin blockchain consists of thousands of independent nodes operating around the world.

Smart contracts: The Brain / Decentralized Applications

Bitcoin Multisig Wallet
An example of a 2-of-3 multi-signature wallet on the Bitcoin blockchain.

Oracles: The Outside World / Decentralized Internet

Chainlink inputs and outputs
Chainlink connects the existing world to the new world; (source).
Centralized oracle
Centralized oracles are a single point of failure.

PART 2: HOW THE CHAINLINK NETWORK WORKS

The Network Effect visualized
A growing network effect visualized; (source).

The Underlying Architecture of the Chainlink Network

A Network of Networks

Monolithic versus heterogenous oracle networks
The Chainlink Network consists of multiple independent oracle nodes and oracle networks running in parallel without cross-dependencies.
Chainlink Network terminology
The various terms used when describing the Chainlink Network architecture.

Diversity of Chainlink Nodes

T-Systems MMS Chainlink node
Deutsche Telekom subsidiary, T-System MMS, is an example of a Chainlink node operator running in-production (source).

Diversity of Data Sources

Chainlink data providers
API providers have a high degree of flexibility on how they can leverage Chainlink to sell data to blockchain markets; (source).

Diversity of Blockchains

Connecting Any Blockchain to All Inputs and Outputs
Chainlink can connect all blockchains to any off-chain input and output.

How Chainlink Provides Oracle Security and Reliability

Decentralization

Chainlink ETH/USD Price Feed
The ETH/USD price reference feed is an example of a decentralized Chainlink oracle network.

Transparency and Data Signing

Etherscan transaction
Each node’s transaction is signed by a private key and stored on-chain as an immutable record; (source).

Reputation System

Chainlink Market
An overview of LinkPool’s oracle node on the Chainlink Marketplace; (source).

Privacy

  • DECO — Zero-knowledge proofs that prove facts about data within a user’s web session without any data ever leaving the web session or the oracle seeing any data it’s not supposed to. For example, having the oracle accompany someone as they log in to their bank account in order to prove through a yes or no answer whether they are above 18 years old or have more than $100,000 USD.
  • Mixicles — An oracle-powered mixer design that generates transaction privacy on the blockchain by separating the smart contract’s logic from its resulting payment. The oracle is used as an intermediary between the two, preventing external actors from correlating a contract’s terms to its subsequent settlement payments.
  • Town Crier — Oracles that leverage trusted hardware (e.g., Intel SGX), referred to as a trusted execution environment. Essentially, the oracle runs in a black box computing environment where the node operator cannot see the instructions sent by the smart contract or the data they generate/retrieve, giving smart contracts complete data, computation, and node operator privacy.
Chainlink DECO
The Chainlink DECO technology uses zero-knowledge proofs to prove specific facts about a user’s web session.

Scalability

Functionalities of the Chainlink Network

Data Sourcing and Delivery

Chainlink powers the DeFi ecosystem
Chainlink powers the DeFi ecosystem by supplying key inputs and outputs

Off-chain Computation

Chainlink and Off-Chain Labs Arbitrum Rollups
Chainlink nodes can act as validators on layer 2 Arbitrum Rollup chains.

Interoperability

Cross-Chain Interoperability Protocol (CCIP) Tech Stack
The architecture of the Cross-Chain Interoperability Protocol (CCIP)

Blockchain Abstraction Layer

Enterprises Can Access Any/All Blockchains Efficiently
Similar to how enterprises use the internet to connect with a variety of partners, enterprises can use Chainlink to connect to any/all blockchains, as well as key external data/API providers, legacy systems, and traditional payments.

Sell Data and API Services

AccuWeather Chainlink Node
AccuWeather is an example of a data provider bringing weather data on-chain by launching a Chainlink node; (source).

The Purpose of the LINK Token

LINK token usage in the Chainlink Network
A generalized architecture of how the LINK token functions in the Chainlink Network
  • Supporting the early launch of projects that go on to be major industry leaders, at which point they can easily fund the costs of the oracle networks they require.
  • Having multiple projects collectively support a shared oracle network that provides data they all require. The more users that join a shared oracle network, the less need there is for a subsidy. Eventually, no subsidy is required at all, and each new user from then on lowers the costs for all existing users
  • Generating a large network effect wherein many of the world’s largest data providers, institutions, blockchains, and smart applications collectively use Chainlink as the standard gateway between blockchains and traditional off-chain systems. Such a network effect leads to two positive feedback loops, which continually generate more data on-chain for smart contract developers and more user fees for node operators to compete for. The end result is an increasingly diverse set of smart applications that can secure increasingly higher value use cases.
The Chainlink Network effect is driven by two cycles: bringing more off-chain resources on-chain and making node operators increasingly more secure.

PART 3: THE CHAINLINK ECOSYSTEM

Products and Services

Price Feeds

Any API

Randomness

Asset Collateralization

Data and Oracle Privacy

Transaction ordering

Keepers

Layer-2 Validators

Decentralized Identity

Cross-Chain Communication

Chainlink use cases iceberg infographic
Price Feeds are only the tip of the iceberg in regards to the oracle services Chainlink provides

Chainlink Users

Lending and Borrowing

  • Aave: Multi-chain money market protocol for borrowing and lending a multitude of on-chain tokens.
  • Compound: Ethereum-based money market protocol that connects lenders and borrowers of on-chain tokens.
  • Celsius: A leading financial services platform for cryptocurrency lending, with tens of billions of dollars under management and over a million users.
  • Rari Capital Fuse: Permissionless framework for creating isolated interest rate markets.
  • Sushiswap Kashi: Lending and margin trading solution built upon the BentoBox contract design.
  • bZx: On-chain money market for borrowing and lending crypto tokens to margin traders.
  • Venus: Binance Smart Chain-based algorithmic money market for lending and borrowing.

Stablecoins

  • Liquity: Interest-free lending platform that enables the minting of the LUSD stablecoin backed by ETH collateral.
  • Fei Protocol: A decentralized and scalable, reserve-backed, stablecoin aimed at achieving governance-minimized central banking.

Derivatives and Synthetic Assets

  • Synthetix: Largest derivatives platform for zero slippage trading of synthetic assets.
  • Alchemix: Future-yield backed synthetic asset platform and community DAO featuring self-paying loans.
  • Thales: A permissionless, non-custodial, and uncensorable binary options trading protocol.
  • Lyra: A options trading platform on the scalable layer 2 Optimism network.
  • MCDEX: Perpetual derivatives platform using automated market makers and order books.
  • Jarvis Network: Synthetic asset protocol which leverages the liquidity of existing cryptocurrencies like USDC.
  • Opyn: A capital efficient options protocol with automated settlement at expiry.

Exchange and Trading

  • dYdX: A layer 2 decentralized exchange for spot trading and perpetual contracts.
  • Loopring: Layer-2 decentralized exchange providing high throughput, low-fee trading.
  • DODO: Proactive automated market maker that mimics human market-making behaviors.

Insurance

  • Arbol: Parametric crop insurance for farmers based on weather conditions.
  • Etherisc: Parametric insurance for real-world events such as flight delays.
  • Nexus Mutual: Decentralized discretionary mutual as an alternative to insurance.

Pegged Assets

  • Paxos: Brokerage and custody platform that provides tokenized real world assets such as US dollars and gold.
  • TrustToken: Blockchain-agnostic stablecoin backed by USD held in reserves.
  • Wrapped BTC: Tokenized Bitcoin on the Ethereum blockchain custodied by BitGo.
  • DefiDollar: Meta-stablecoin backed by centralized and decentralized stablecoins.

Real-World Assets

  • RealT: Tokenized real estate allowing users to buy fractions of a property’s cash flows.
  • CrescoFin: Tokenized invoice protocol providing interest-yielding insured deposited products.

Payments

  • Flexa: Cryptocurrency payment platform for merchants to accept instant, guaranteed crypto payments while receiving the currency of their choice.
  • Crypto.com: Crypto mobile app where users can pay merchants using tokens via a Visa debit card.

Rebase Tokens

  • Ampleforth: Algorithmic rebase token pegged to the inflation-adjusted dollar.
  • Base protocol: Algorithmic rebase token pegged to the total crypto market capitalization.

Asset Management

  • Set Protocol: Non-custodial asset management protocol for social trading and indices.
  • Tornado Cash: Privacy mixer for sending confidential on-chain transactions.

On-chain collectibles and NFTs

  • Bored Ape Yacht Club: A collection of 10,000 unique Bored Ape NFTs on the Ethereum blockchain.
  • EtherCards: NFT gamification and monetization platform that helps artists maximize the value of their art.
  • Axie Infinity: Pokémon-inspired universe where users breed and battle Axies.
  • Aavegotchi: DeFi-powered crypto-collectibles backed by interest-generating tokens.
  • Parallel: A Sci-Fi digital collectible card game being built on the Ethereum blockchain
  • Ether Legends: Physical and digital collectible trading card game with PvP and PvE.
  • Wildcards: Non-fungible tokens representing a unique animal from a conservation org.
  • Illuvium: A community governed AAA blockchain-based video game with collectable NFTs.

Betting platforms

  • PoolTogether: No-loss savings game for users to win prizes without risking deposits.
  • EarnBet: Provably fair gaming platform operating in the WAX blockchain ecosystem.
  • Bet Protocol: Esports and sports betting platform.

On-chain gaming

  • Blocklords: Blockchain-based medieval grand strategy game on layer 2
  • Planetarium: Ecosystem for community-powered online games via Libplanet network
  • Evolution Land: Ecological cross-chain game application of the Darwinia Network
  • War Riders: MMO game based on customizing war vehicles and battling opponents
Chainlink ecosystem
The Chainlink ecosystem consists of hundreds of in-production and in-progress integrations; (source).

Enterprises, Working Groups, and Recognitions

Recognitions

  • World Economic Forum: Public-Private consortium that co-authored a report with Chainlink Co-founder Sergey Nazarov on how oracles provide interoperability between blockchain networks and legacy systems, as well as recognizing Chainlink as a Technology Pioneer.
  • Gartner: A global research and advisory firm that recognized SmartContract.com in 2017 as a leading blockchain project, and in 2019 discussed how Chainlink is key to Google’s blockchain strategy.

Enterprises

  • Google: One of the world’s largest tech companies collaborated with Chainlink to bring Big Query data and NOAA weather data onto the Ethereum blockchain via Chainlink oracles.
  • Amazon Web Services: The world’s largest cloud computing platform collaborated with Chainlink Labs to launch the AWS Chainlink Quickstart, a one-click workflow to deploy a security-hardened Chainlink oracle node on AWS across multiple blockchain networks.
  • Deutsche Telekom T-Systems: A subsidy of Europe’s largest telecommunications provider launched a Chainlink oracle node to feed real-world financial market data to smart contract applications, supporting and monetizing the growth of the DeFi ecosystem.
  • Swisscom: The largest telecommunications provider in Switzerland (51% ownership by the Swiss government) joined the Chainlink network as a node operator to power DeFi applications with aggregated financial market data.
  • Oracle: The world’s largest database company collaborated with Chainlink to create a ‘virtuous cycle of innovation’ by launching Chainlink nodes for numerous API startups running on Oracle’s Cloud Infrastructure.
  • SWIFT: The global standard in interbank messaging, consisting of a consortium of the world’s largest banks, collaborated to create a Smart Contract Securities Proof-of-Concept in which the interest rates of top banks were aggregated and then used by a smart contract to trigger a bond interest payment made on the SWIFT network using its ISO20022 messaging format.
SWIFT Chainlink Proof of Concept Smart Security Bond
SWIFT Proof of Concept showing how Chainlink enables the creation of smart security bonds

Enterprise and Academic Research Working Groups

  • Baseline Protocol: Privacy-preserving framework for using the Ethereum Mainnet as a common frame of reference between enterprise backend systems.
  • InterWork Alliance: Platform-neutral, non-profit organization dedicated to creating the standards frameworks needed to increase innovation across token-enabled ecosystems.
  • Hyperledger Avalon: Collaboration between Hyperledger, EEA, and cloud service provider ecosystems to standardize attested off-chain computations for smart contracts.
  • Blockchain Service Network (BSN): Chinese government-supported initiative to provide businesses access to low-cost blockchain cloud computing services and tooling.
  • Enterprise Ethereum Alliance: The Ethereum Mainnet Integration for Enterprises taskforce provides specifications to integrate the Ethereum Mainnet with ERP, CRM, and other corporate systems of record.
  • The Initiative for Cryptocurrencies and Contracts (IC3) — a leading academic research organization working with industry academics and business leaders to achieve mainstream adoption of cryptocurrencies and smart contracts.
IC3 Partners
A list of IC3 Partners, including Chainlink; (source).

Chainlink-Specific Companies

Chainlink Market

Chainlink Oracle Reputation (COR)

Node Operators

Chainlink Grant Program

Chainlink Grants Program
The Chainlink Grant Program is accelerating both the data and node security cycles, enriching smart contract economies across all blockchains.

Team and Advisors

Team

  • Started building smart contracts pre-Ethereum in 2014
  • Built the first widely used interface for DEXes
  • Built the first blockchain-based email service
  • Built the first centralized oracle service
  • Last but not least, built the first decentralized oracle network.
  • Professor of Computer Science at the Jacobs Institute at Cornell Tech
  • Former chief scientist of world-renowned cybersecurity company RSA
  • Formalized Proof of Work consensus in 1999 (powers Bitcoin and Ethereum)
  • Created Proof of Retrievability in 2014 (powers FileCoin and Sia)
  • Co-author of the Chainlink whitepaper in 2017 and only works with Chainlink within the blockchain industry
  • Co-author of the Chainlink Mixicles whitepaper in 2019
  • Co-author of the CanDID whitepaper in 2020 in collaboration with J.P. Morgan
  • Co-author of the Chainlink 2.0 whitepaper in 2021
  • Co-founder of The Initiative For CryptoCurrencies & Contracts (IC3)
  • 36,000 total scholarly citations
  • Previously CTO of Bitgo, where he built the industry-leading crypto custody solution.
  • Architect of Wrapped BTC, the most widely used form of tokenized Bitcoin on Ethereum
  • Now building scaling solutions for the Chainlink Network to lower user costs.
  • Worked previously as a software engineer and team lead at Pivotal Labs
  • Built mission-critical systems responsible for securing sensitive HIPAA compliant data and scalable payments automation software
  • Oversees countless engineers and integration specialists who aid in the development and deployment of Chainlink oracle networks
  • Lead companies that have been acquired by Amazon
  • Expert in applied artificial intelligence
  • Best selling Amazon author
  • Graduated from Harvard Business School

Advisors

  • Chief Executive Officer (CEO) of LinkedIn for 12 years, the world’s largest professional network
  • Executive Chairman of LinkedIn
  • Facilitated the $26B acquisition of LinkedIn by Microsoft
  • Founding Partner at Next Play Ventures
  • Advisory board member of Intuit and DonorsChoose
  • Founder of DocuSign, the market-leading e-signature provider around the world and pioneer of the e-signature industry.
  • Investment partner at Seven Peaks Ventures
  • Joined as a business advisor to Chainlink in early 2019
  • Former Chief Technology Officer (CTO) at Coinbase, the largest cryptocurrency exchange in the United States
  • Former General Partner of Andreessen Horowitz, where he helped the venture capital firm move into the blockchain industry
  • Co-founder of Earn.com, which was acquired by Coinbase
  • Co-founder and CTO of Counsyl and won a Wall Street Journal Innovation Award for Medicine
  • Co-founder of Teleport, which was acquired by Topia
  • Co-founder and Board Member of Coin Center, the leading non-profit focused on cryptocurrency policy issues
  • Angel Investor
  • Former Senior Manager at Apple
  • Director of Engineering Blockchain at Facebook
  • Co-creator of the LLVM, which generates the low-level machine code running every Apple device, as well as much of Google, Nvidia, and Intel
  • Decentralized consensus researcher
  • Associate Professor at the University of Illinois
  • Associate Director of the Initiative for Cryptocurrencies and Contracts (IC3)
  • Board member of the Zcash Foundation and Ethereum Enterprise Alliance
  • Advisor to both Zcash and Tezos
  • Former Chief Marketing Officer (CMO) of Twilio, helping build it into the world’s leading cloud communications platform
  • Faculty member of Stanford University
  • Lead marketing initiatives at top technology firms including Nuance and Genpact
  • Vice President of Design at HashiCorp, a leader in infrastructure automation software
  • Experience designing developer products in cloud-based software companies including Salesforce and Heroku.
  • Former Developer Liaison, DevOps Engineer, and Security Engineer at the Ethereum Foundation
  • Member of the Ethereum Cat Herders, a decentralized group that supports Ethereum through project management and consensus gathering.

Research Team

Chainlink Reserach Team
The Chainlink Research Team consists of numerous leading academics; (source).

Smart Contract Summit

SmartCon #0 (2020)

  • Ari Juels joined Chainlink Labs as Chief Scientist to lead the new Chainlink Labs Global Research Program.
  • Chainlink Labs acquired DECO from Cornell University enabling privacy-preserving blockchain oracles.
  • A panel discussion with DeFi leaders including Sergey Nazarov (Chainlink), Andre Cronje (Yearn.finance), Stani Kulechov (Aave), and Kain Warwick (Synthetix).
  • OpenLaw developed a Microsoft Office extension to enable the usage of smart contracts within Microsoft Word documents.
  • Off-Chain Labs explored how the launch of Arbitrum layer 2 technology will enable highly scalable smart contracts with orders of magnitude more transactional throughput.

SmartCon #1 (2021)

***Continued Improvements

CONCLUSION: USING TECHNOLOGY TO BUILD A BETTER TOMORROW

List of Additional Resources

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Breaking down the information asymmetry on Chainlink, smart contracts, and the cryptocurrency ecosystem. Founded by The_Crypto_Oracle and ChainLinkGod

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Breaking down the information asymmetry on Chainlink, smart contracts, and the cryptocurrency ecosystem. Founded by The_Crypto_Oracle and ChainLinkGod