What is exception propagation in oracles

What is Chainlink?

What problem does Chainlink solve?

Realizing smart contracts based on blockchains is always a challenge for developers. Executing contract transactions within a clearly defined ecosystem is the least of the problem. Because that's exactly what the concept of the blockchain was ultimately developed for.

chain.link website

Brief overview of Chainlink

BlockchainEthereum (ERC-20)
inventorSergey Nazarov, Steve Ellis, Ari Juels
publicationSeptember 2017
developerChainlink Labs
Use caseDecentralized oracles, data connection
WhitepaperChainlink whitepaper

After all, bitcoin transactions are essentially nothing more than greatly reduced smart contracts. It will be more difficult as soon as external factors or data to be included in the contracts. The successful delivery of goods by post, for example, or that Result of a soccer gamethat for a Sports bet should be evaluated. Then so-called Oracles required: Impartial Persons or institutions whose reliability the partners agree on before concluding a contract.

Such oracles sometimes provide a weak spot in the contract: be it because they are biased, unreliable or simply too expensive to support a simple contract meaningfully in the execution.

What are smart contracts?

In our article on smart contracts, you will find interesting information about how smart contracts work and how they can be used.

The Chainlink platform tries to solve this problem by building a decentralized trading center For Oracle services, to meet. The developers are initially relying on the proven Ethereum network, but want to outsource large parts of the functionality from the blockchain in the medium term. This is to keep the costs for using the marketplace low. On-chain transactions must be paid for with the Ethereum token "LINK".

How do the oracles work at Chainlink?

Just like the oracles in mythology, which promised those seeking help knowledge and prophecies by invoking a higher authority, the oracles in smart contracts also serve as reliable, external source for the Contract related information. In the case of the soccer bet described above and shown in a smart contract, this can be, for example, a website that displays the game results in machine-readable form offers. A smart contract can read out this information and, depending on this, pay one of the contractual partners out after the game.

If the stake is not too high and the website is trustworthy, this method is a good way to map sports betting in a smart contract. Typically, the operator of the oracle will charge a small fee for providing the information. But what if a lot of money is at stake and the opportunity to do so Oracle provider to bribe or the notifications too distort becomes more attractive?

In these cases, it is a sensible option to provide the information several independent oracles to be used for reaching a judgment. Only when, for example, four different websites consistent report the outcome of the soccer game, the contract will actually be executed. However, this approach has the disadvantage that the selection and payment of oracles is becoming more and more complex and cost-intensive. Especially not only that Reliability of the information must be ensured.

In general, oracles have to meet three important criteria:

  • Correctness of the data provided (Integrity)
  • Availability of the service (Availability)
  • Discretion regarding the content of the contract (Confidentiality)

The complete fulfillment of these requirements is important in order to make smart contracts between unknowns possible in the first place. If it is only a matter of realizing a single contract, the effort of selecting oracles by hand and agreeing on them is still justifiable. At the latest when smart contracts are concluded automatically, for example to interlink IoT devices, this is no longer an option. So far, this has led to the fact that the Oracle service has tended to be centralized. The Risk of abuse increases sharply in this way.

The Chainlink solution

Chainlink is an approach to organize the offer of Oracle services via blockchain and to place them on a trustworthy basis. The solution implemented by Ethereum is intended to provide three important mechanisms on-chain in order to enable the selection of the appropriate oracles. On the one hand, it is this Reputation management for the Oracle provider.

As part of this, the three criteria defined in the last section for a reliable Oracle are evaluated: Integrity, Availability and Confidentiality. On the other hand, Chainlink has the necessary features to firstly Matchmaking between Smart contract partners andOracle providers and, secondly, to map the aggregation of the contract offers.

In the whitepaper, which describes the (planned) functional scope of the platform, the Chainlink developers repeatedly emphasize that in the medium term it should be possible to realize large parts of the service that is currently on-chain, also away from the Ethereum blockchain. For example, it should be feasible to offer oracles on your own trading platforms instead of using Chainlink's matchmaking. Just that Reputation management of the network would then be used on the alternative platforms to evaluate the offers.

Reputation in the Chainlink network

It is all the more important to present the reputation of individual Oracle providers securely and unadulterated. The Chainlink team emphasizes that the absolutely 100% Reliability of an Oracle will never be feasible. Because even the most reliable provider is always at risk of being hacked or compromised in any other way. Hence, for most smart contracts, it is important to rely on several oracles which their knowledge in the best case different sources relate to support. Precisely this element is important for the reputation measurement by Chainlink, as the performance of the oracles can be compared with one another.

Chainlink records, for example, the time that the individual oracles need to announce a certain event. The longer a provider takes to notify an event, the worse it falls Availability assessment out.

The assessment of the Data integrity. If there is more than one Oracle for an event, it is quick and easy to see if any of the sources are from the majority the other deviates. In this way, a point value is obtained for each Oracle, which informs about the reliability of the provider.

In the medium term, this should mean that less reliable Oracle also cost less and can thus be used for low-value contracts. To prevent an Oracle from simply repeating the information from a faster competitor, it is possible to announce events in encrypted form first. Only when reports have been received from several oracles are they then published openly. Every Oracle is forced to collect its own information - otherwise there is a risk of poor availability assessment.

Matchmaking with Chainlink

In addition to the management of the reputation, the aggregation of contract information and the Matchmaking between Oracle and contractual partners central functions. The matchmaking basically works like an exchange. Anyone who wants to set up a smart contract defines the Requirements for the Oracle. On the one hand, these can be criteria that Reputation of the Oracle concern, on the other hand also the Terms of the contract included.

For example, the term of a smart contract can play an important role when it comes to the costs that the Oracle provider has to calculate. A long-term contract is more expensive than one that only requires a few minutes of data monitoring. Conversely, in the case of a contract whose terms are of a longer-term nature, it may be less important whether an Oracle informs about certain events within fractions of a second. Last but not least, the buyer of course also defines how many oracles he needs for his smart contract and how much he is willing to pay for them at most. The requirements are published via the Ethereum blockchain.

Providers whose oracles meet the buyer's conditions now have the opportunity to submit offers for the contract. These offers are automatically aggregated. The selection is made manually by the buyer (or the buyer can let software decide). There is no blockchain-side automatism for accepting bids. In this respect, ancillary agreements between buyer and provider can be made at this point without any problems. Chainlink assumes that bidding and any further negotiations will primarily take place off-chain in the future.

Chainlink's potential and opportunities

The lack of one decentralized infrastructure for the Brokerage of oracles is a challenge for smart contract solutions implemented on Ethereum as well as on other blockchains and similar services. After all, it is particularly important for fast, automated smart contracts to be able to react quickly to problems with an Oracle provider.

Chainlink promises to have solved this problem with a kind of meta-blockchain for trading with oracles. Major parts of the project are still in constant development. Time will tell whether the system works as hoped.

Smart contracts are important, among other things, to enable payments between the users of different blockchains. An efficient and reliable market for oracles thus has the potential to increase the permeability and compatibility between the various cryptocurrencies.

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