Oracles, ChainLink, and CCIP — VegaX Research Report

Oracles, ChainLink, and CCIP — VegaX Research Report

Oracles, Chainlink, and CCIP

What is an Oracle?

How Chainlink Solves the Oracle Problem

  1. Decentralized Finance relies on accurate, verifiable data. Derivatives, leveraging, insurance, and trading all require external inputs to function. Oracles fuel smart contracts with the information they need to execute; converting the off-chain data into an accessible format.
  2. As the global economy becomes more digitized, I’m sure we can all picture several physical assets/ownership titles being transferred to the blockchain. Oracles can update the price of a used car, the insurance policy on a home, and even the weather forecast. While there are technical limitations to constantly updating the worth and value of real-world assets, overall oracle services are pivotal. As the digital asset ecosystem is built out, the demand for Oracles will increase.
  3. As adoption rates increase, Oracles will be forced to innovate and scale up to meet the demand for data queries. Therefore, oracles as a whole represent a concentrated medium for getting exposure to mass adoption.
  1. Efficient Off-chain Consensus with OCR 2.0: Chainlink’s enhanced off-chain computation protocol reduces gas costs for users by efficiently aggregating Oracle attestations from hundreds of off-chain nodes, securely validating cross-chain transactions in a tamper-proof way.
  2. Universal interface to build cross-chain apps: Standardized interface for smart contracts to send messages to any blockchain network. With a single method call, developers can communicate across any Chainlinked blockchain.
  3. Supports Any Generalized Message: Data sent across blockchain networks can be encoded and decoded in any manner, providing developers a large degree of flexibility while eliminating the complexity of building chain-specific integrations
  4. Reorg Protection and Mitigation: Blockchain reorganizations on the source and destination chains are preemptively mitigated through floor confirmation times. As a result, users are protected against disappearing messages, ensuring cross-chain messages are delivered.
  5. Expendable and Future-Proof: CCIP will continue to be updated over time to support more advanced features. As the value secured increases, additional defense-in-depth approaches would be deployed.

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