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You've probably heard that blockchain technology and "smart contracts" will revolutionize our lives.
But there's a problem: before smart contracts can do something really useful, they need a reliable way to connect with events in the real world – and this has so far proved impossible. This is the so-called "oracle problem", a technological challenge that is still hindering any possibility that the blockchain can explode and become a part of our daily lives.
Until now, maybe. A startup called ChainLink is combining its software with a reliable hardware system called Town Crier, developed by an important academic research group on cryptocurrency. Together, they could be closer than ever to solving the problem.
Smart contracts are computer programs stored in a blockchain. They can be used to automate the unstoppable token-token transfer between users, based on agreed conditions. "Oracles" are real-time data feeds that provide information such as weather data, exchange rates, airline flight information and sports statistics to smart contracts.
The idea is that by working together, the two systems can allow blockchain-based services to interact with real-world events with a degree of confidence greater than what is possible from today's oracle services. For example, if your flight is canceled but you have purchased flight insurance, a smart contract may pay you instantaneously after receiving an update from a reliable source of flight schedules.
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So, what's the problem? The oracle services introduced up to now defeat the purpose of the use of a blockchain in the first place, says Chainlink CEO Sergey Nazarov. For example, in Ethereum all the nodes participating in the network calculate each intelligent contract, making it virtually impossible to close the programs. But today's oracle services are too centralized, says Nazarov. They represent single points of error that make the targets of tampering.
This means that smart contracts do not have reliable access to real-world data. Without that, they are "like a city without electricity," says Ari Juels, a computer science professor at Cornell. "There are not many interesting things you can do."
Juels and colleagues from Cornell & # 39; s Initiative for Cryptocurrencies and Contracts have developed Town Crier, which they describe (PDF) as a "high trust bridge" between the Ethereum blockchain and HTTPS-enabled online data sources. The main component is a program that runs inside a piece of isolated hardware called a secure enclave.
The function of the enclave is to protect the program against malicious attacks and to keep the calculation confidential. It receives data requests from smart contracts – for example, a flight insurance contract can ask if a flight has been canceled – and then retrieves the responses from the websites and transmits them to the blockchain. Using cryptography and assuming trust in hardware, he provides proof of the flight insurance contract that the data really comes from Town Crier and has not been messed up.
Town Crier may be more reliable than other data feeds, but by itself it does not offer the reliability of decentralized systems. This is where ChainLink comes into play. Its software orchestrates decentralized oracle networks to draw on multiple data sources for intelligent contract-based services, so they do not have to rely on one alone.
Using cryptography, the ChainLink service provides evidence on the blockchain that data is actually the information it is committed to providing. Customers can pay different levels of decentralization and nodes can earn in exchange for sending data. Nazarov says that the combination of ChainLink software with the Town Crier hardware system is the first "decentralized and provenly secure oracle network".
ChainLink has collaborated with several smart-contract projects to demonstrate its oracle network. For example, a project called OpenLaw, which is developing legal agreements based on smart-contract, is using a ChainLink oracle to determine the exchange rates between the ether and the US dollar at any given time. "I do not know if anyone has completely solved the & rsquo; oracle problem," says OpenLaw co-founder Aaron Wright. But he says that ChainLink and Town Crier are a "good first attempt".
