ChainLinkGod Podcast - How Oracles Go Beyond Data Delivery: Off-Chain Computation
Primer: Join ChainLinkGod and Crypto Oracle as they discuss about the history of computation — from pen and paper computations to oracle computations. They discuss the strengths and limitations of blockchain computations and how oracle computations extend blockchains further with off-chain computation with security guarantees.
Brief Recap On Oracles
Oracles fetch data from the real world into the blockchain
They validate the integrity and correctness of the data
There’s many use cases for Oracles today:
Fetching financial market data for DeFi applications
Weather data for crop insurance
Flight data for flight insurance
Features Of Chainlink
Chainlink is chain-agnostic. It can run natively on any chain without a dependency on another chain
It is heterogeneous — multiple Oracle networks can run in parallel without any dependencies on each other
It’s customizable
Trust-Minimized Off-Chain Computation
Idea is to reduce trust and rely on mathematical guarantees during computation
This extends the capabilities of a smart contract beyond what it could achieve on its native blockchain
History Of Computation
Computation could be viewed on a spectrum of trust
In the beginning, manual computations were done on pen and paper
It then moved to analogue computations
Now, the vast majority of computations are digital and takes place on computers
What has been used for computation for the past decade could be termed as centralized or Web2 computation (e.g. performed in some centralized data centre operated by Google, Facebook, Apple, Amazon, etc.)
This allows for economies of scale and for each individual computation to be extremely cheap
There are trade-offs for using centralized computation:
Have to trust the entity correctly perform the computations
Have to trust that a computation was performed
“But because they [Web2 services] control the computation, they can censor you, they can kick you off the platform.”
- Crypto Oracle
Censorship by Web2 services is becoming more prevalent. As big tech grows larger, their power to censor gets magnified
Web3 presents an alternative to centralization capture of computation platforms
Blockchain Computation
Leverages a decentralized network of nodes that validates and performs computations
Nodes perform various sorts of computations:
Verifying signatures on a transaction
Calculating various proofs to create new blocks
Executing historical blocks to check the work of other nodes
Smart contracts are powered by blockchain computation. It will have a high degree of censorship resistance, be credibly neutral, have a strong uptime, and be permissionless by design
Anyone can opt in to the rules that they want to participate in. Hence, helping ensure that those rules are being followed
Limitations Of Blockchain Computation
A highly decentralized blockchain like Ethereum has a slow throughput
The more decentralized a blockchain, the slower the throughput and more expensive the computations
Layer 2 networks are cheaper and faster, but they will eventually hit limits on their computational capacity
Why Do We Need A Decentralized Blockchain?
Decentralization needs to have a low barrier of entry, so that more people can participate in the network
If the barrier to entry is too high, nobody can verify the network and it ends up going back to the Web2 model
Layer 2s optimize and use decentralized blockchains for settlement. This provides a higher ceiling of transactions. But ultimately, there will still be a ceiling on transactions
“If you increase the width of a highway, and now you have more lanes, well, now you have more cars to use those lanes, and then it gets filled back up. And now you're kind of back at the same problem, you have more transactions going through, but you're still going to reach a level of congestion.”
- ChainLinkGod
For blockchains to scale, they need to optimize their own parameters and horizontally push more things off-chain while still verifying what happens off-chain
Oracles And Off-Chain Computations
Decentralized oracle networks could be used to extend the computational capabilities of blockchains while still being anchored to the blockchain
Oracles achieve trust minimization through:
Not having a single point of failure
Having financial incentives to ensure correct computations are done
Uptime
Methods of verifying on-chain that off-chain computations are done correctly
There are different methods of on-chain verifications of off-chain computations:
Secure multi-party computation where the computation is split up across multiple entities that all generate a single output
Cryptographic/ZK proofs
Fraud proofs where you can retroactively prove a computation was incorrect
Re-executing what happens off-chain on-chain when an execution needs to happen
Parameters could be fine-tuned to the user’s needs (e.g. number of oracle nodes, different levels of cryptoeconomic security, level of privacy, etc.)
Oracle nodes can be directly used to power layer 2 off-chain networks
Types Of Oracle Computations
Verifiable Randomness: Chainlink oracle nodes serving as a random number generator where users can prove that the random number generated is tamper proof
Chainlink Keepers: An automation solution that sends a transaction to a smart contract based on certain predefined conditions
Fair Sequencing Services (FSS): Service that takes in users’ transactions and orders them according to some notion of fairness
DECO: Generates zero-knowledge proofs. Used to test off-chain and relay it back on-chain without revealing any of that data
Cross-Chain Interoperability Protocol (CCIP): Oracle networks that read and write between different chains in order to move data, assets, and commands between the various chains
Long-Term Trend Of Oracles
The computations that Oracles perform today are just the tip of the iceberg
The blockchain starts to act more as a settlement layer while oracles act as the computational layer
They have strong security guarantees and has a scalable model that will enable blockchains for mass adoption
Their thesis is that oracles will play an incredibly crucial layer at the execution layer to complement the consensus in the settlement layer
Oracles could also serve as a wrapper for Web2 systems to be used by blockchains
Oracles are the ultimate middleware layer sitting between everything in the ecosystem in a trust-minimized manner
“People still generally think of, oh, I know Oracles, they’re price feeds, it's like saying the internet is just email like, okay, you're not technically wrong, but it's not the full scope of things that Oracles can and will achieve.”
- ChainLinkGod
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