Ethereum (ETH) and multi-chain oracle service Chainlink (LINK) is building out a new oracle network that could provide a solution (in part) to both scalability and front-running issues.
Dubbed Chainlink 2.0, the network creates what its team calls decentralized oracle networks (DONs).
Introducing Decentralized Oracle Networks
Decentralized oracle networks are second-layer networks operating off-chain, meaning almost all of the data related to the smart contract is stored and computed off-chain before an oracle makes an input on the blockchain to trigger the outcome of a smart contract.
For example, if you had a smart contract that managed trades between Ether and decentralized exchange (DEX) Uniswap (UNI), decentralized Chainlink oracle nodes would aggregate all the various exchange data for this pair.
These new off-chain decentralized oracles would exclusively feed the on-chain smart contract the exact price.
For more complex smart contracts that require more data like collateralized tokens, for example, off-chain oracle services would mitigate Ethereum miners from front-running trades on-chain.
Chainlink 2.0 According to LINK CEO and Founder Sergey Nazarov
Chainlink CEO and co-founder Sergey Nazarov likened these new DONs to the application programming interfaces (APIs) that developers use for everyday computer functions.
In the Bitcoin (BTC) ecosystem, so-called discreet log contracts (DLCs) require similar off-chain decentralized oracle services.
“To create the next generation of smart contracts, developers need an easily accessible, provably secure, and scalable set of decentralized services surrounding their smart contract code with (key) additional functionality,” – Sergey Nazarov, Founder and CEO of Chainlink Labs in a recent interview with Coindesk.
For a more in-depth analysis, you can download a PDF of the Chainlink 2.0 whitepaper here.
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