Chainlink is a decentralized oracle network launched by Sergey Nazarov in May 2019. Its goal is to act as an expansion layer for blockchain networks, maximize the use of off-chain resources, and enable developers to create and use decentralized services. The data price feed service is Chainlink’s main product. Based on the price feed service, Chainlink also provides Automation (automated execution of smart contracts), Proof of Reserve (on-chain audit), FaIr Sequencing Services (transaction sequencing), DECO (privacy protection oracle), and VRF (verifiable random number generator). Waiting for service.
Chainlink Price Feeds refers to Chainlink’s core oracle service, which enables decentralized applications (DApps) ) to access off-chain data and services. Services on Chainlink are provided by Decentralized Oracle Networks (decentralized oracle network), which relies on a multi-layered decentralized aggregation system (Multi-Layered Decentralized Aggregation System) and off-chain reporting Mechanism (Off-Chain Reporting).
Decentralized Oracle Networks (DON) is the core structure of Chainlink. In addition to oracle services, DON also supports other Chainlink services.
There are many Node Operators in the Chainlink network. Different node operators will form oracle networks, and DON is composed of independently operated oracle networks. Each oracle network can customize its services, consensus, and operating rules (such as data sources, calculation methods, etc.).
Chainlink’s oracles do not rely on a single price source. Instead, Chainlink uses a multi-layered decentralized integration system, with each layer having multiple actors to aggregate/integrate multiple data sources. After the data is integrated layer by layer, a fair and accurate answer will eventually be obtained.
In summary, Off- Chain Reporting is the mechanism by which the oracle network generates final data off-chain.
First of all, each oracle network will randomly select a node operator to become the Leader (group leader) on a regular basis. When a user requests a price feed, the team leader will ask the node operators to submit their answers and sign them (at this stage, everyone cannot see each other's answers to prevent cheating). After the collection is completed, the team leader will generate a report that collects everyone's answers and asks everyone to confirm again. If the number of confirmations reaches a certain threshold, the team leader will send the report to the integration contract on the chain to generate a final answer.
Since most processes occur off-chain, the operational efficiency of the oracle machine can be improved and costs can be reduced. Furthermore, all data and signatures are included in the report and passed on-chain, making the final result trustworthy and verifiable to a certain extent.
Chainlink Automation is Chainlink’s decentralized off-chain computing layer. Developers can customize the automatic execution program of smart contracts: when a predetermined event occurs, the event will be broadcast to the smart contract, and then trigger the automatic execution of the contract. For example, Aave can require on-chain contracts to automatically liquidate when a certain mortgage rate is reached.
What is Aave? Please refer to the "What is a Loan" and "What is an Aave" sections.
Chainlink Proof of Reserve is a real-time on-chain, automated audit service. It can be used to monitor the number of assets or the financial status of the protocol in real time. For example, to monitor $WBTC’s $BTC reserves, Chainlink checks its corresponding $BTC balance on the Bitcoin blockchain every ten minutes. Whenever it detects that the reserve changes beyond a certain threshold, Chainlink will update the balance data on the chain.
CCIP (Cross-Chain Interoperability Protocol) is a cross-chain communication standard. Developers can On the basis of building a cross-chain bridge. CCIP enables developers to transfer tokens or instructions to smart contracts across chains.
Fair Sequencing Services (FSS) is a transaction sequencing service. Through FSS, users can send transactions to the oracle network. The oracle network will reach consensus on the ordering of transactions based on the time each transaction was received. The network then sorts, packages and sends the transactions to the chain for execution. FSS is designed to protect users from various attacks such as front-running and back-running.
DECO is a privacy-preserving oracle technology based on zero-knowledge proof. It enables data verification off-chain while uploading cryptographic certificates on-chain for further utilization. DECO uses zero-knowledge proofs to verify off-chain information without being publicly viewable on-chain or even in the oracle itself.
Chainlink VRF (Verifiable Random Function) is a fair and verifiable random number generator (RNG). This service can be used to ensure fairness in different scenarios such as games, NFTs, lotteries, and airdrops.