Hybrid Smart Contracts by Chainlink
Chainlink defines the role that hybrid smart contracts play within emerging blockchain-based trust models and showcase the many decentralized services that Chainlink oracles provide to extend their capabilities.
A hybrid smart contract is an application that consists of two parts: 1) smart contract—code that runs exclusively on the blockchain, and 2) decentralized oracle network(s)—secure off-chain services that support the smart contract. The two components interact with one another seamlessly and securely to form a single hybrid smart contract application. The result is on-chain code that is augmented in a variety of unique and important ways, opening up many new use cases that would not be possible through on-chain code alone due to technical, legal, or financial constraints.
Hybrid smart contracts synchronize two distinctly different computing environments to create a superior application that neither a blockchain or an oracle network could achieve alone, particularly because each environment specializes in providing features that the other does not. On-chain code runs in an extremely secure and limited-functionality blockchain environment with a reduced attack surface area, providing users a high-degree of execution and storage determinism—the code will run exactly as written and results will remain permanently and immutably stored. Conversely, DONs run off-chain and thus offer infinitely more functionality flexibility and data accessibility.
With hybrid smart contracts defined, let’s explore the many decentralized services available through Chainlink DONs that can greatly enhance a smart contract. The decentralized services will be split up into two broad categories: off-chain data and off-chain computation.
🔹Off-Chain Data
DONs can be used to bridge various types of external data to and from blockchains, enabling hybrid smart contracts to be written around those specific pieces of data. Some of the initial data types made accessible include:
- Price Feeds — asset price data that’s been aggregated from hundreds of exchanges, weighted by volume, and cleaned of outliers and wash trading.
- Proof of Reserve — up-to-date data about the current reserve balances backing tokenized assets, such as the BTC reserves collateralizing WBTC or the USD bank account collateralizing TUSD.
- Any API — premium data from password-protected APIs, ranging anywhere from weather forecasts and sports match results to information from an enterprise backend and IoT network.
- Blockchain Middleware — abstraction layer for an off-chain system to read and write data to and from smart contracts on any blockchain network.
🔹Off-Chain Computation
DONs can perform a variety of off-chain computations on behalf of the smart contract to help it achieve specific inputs or generate certain features not possible on its specific blockchain, such as privacy, scalability, and order fairness. Some of the current and upcoming off-chain computations possible through DONs include:
- Keeper Network — automation bots that perform regular maintenance tasks for the smart contract, waking it up when it needs to perform key on-chain functions.
- Off Chain Reporting (OCR) — scalable aggregation of oracle node responses in a DON that are then delivered on-chain in a single transaction to reduce on-chain costs.
- Scalable Computation — high-throughput, low-cost contract execution for standalone smart contracts, which syncs on-chain periodically using existing layer-2 technology.
- Verifiable Randomness Function (VRF) — secure and verifiable random number generation backed by cryptographic proofs that prove process integrity.
- Data and Computation Privacy — privacy-preserving oracle computation that makes sensitive data confidentially available to smart contracts using zero-knowledge proofs (DECO), trusted hardware (Town Crier), secure multi-party computation, and/or using select DON committees.
- Fair Sequencing Services (FSS) — decentralized transaction ordering based on a predefined notion of fairness, preventing frontrunning and miner extractable value (MEV).
- On-Chain Contract Privacy — transaction privacy for a smart contract via a decorrelation between the contract logic and settlement output, using the DON to relay communication between the two parts such as with Mixicles.
What is Chainlink?
Chainlink is the most widely used and secure way to power universally connected smart contracts. With Chainlink, developers can connect any blockchain with high-quality data sources from other blockchains as well as real-world data. Managed by a global, decentralized community of hundreds of thousands of people, Chainlink is introducing a fairer model for contracts. Its network currently secures billions of dollars in value for smart contracts across the decentralized finance (DeFi), insurance and gaming ecosystems, among others.
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