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Audio and transcript from the April 7th, 2022 installment of “Conversations with the Coop” with ChainLinkGod - Community Ambassador at Chainlink.
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Crypto Texan: Hello, everyone. Welcome to Conversations with the Coop. This is where we source questions from the index coop community to gain insights from today's leaders in crypto and DeFi. I'm your host, Crypto Texan. And today on the show, we have ChainLinkGod, who's the community ambassador to Chainlink.
So ChainLinkGod or CLG, how's it going today? Are you having some bitcoin Miami FOMO?
ChainLinkGod: Yeah, a little bit. Unfortunately, I wasn't able to go but, otherwise, always having a good time link billing. So thanks for having me on.
Crypto Texan: You're pretty good at the link billing too, and just based on your Twitter following as well. I think you have like 130,000 followers now.
ChainLinkGod: Yeah, I have a little bit of experience educating people on Chainlink.
Crypto Texan: Well, good. And that's why you're here, too. So let's start with your background, CLG. How did you get into crypto, DeFi, and how did that road eventually lead you to Chainlink?
ChainLinkGod: Yeah, it's a good question. Essentially in 2018, early 2018, I was in the gaming community and I saw GPU prices basically skyrocketing. I looked into it, I saw this thing, crypto, which I knew about it. But it wasn't until I learned that you can run a program on your computer and money spits out that I really had to dive into it and understand what the hell this technology is.
So at the time, I was going to school for computer science. And so I really took a first-principles approach as to what crypto matters. And that went from Bitcoin over to Ethereum and really dove into the value of smart contracts, how the cryptography works, decentralized consensus, the social consensus. But ultimately, it just kept running into like, "Okay, it's great. But how do these contracts actually execute based on things in the real world?" How does it know what the price of a home is or who owns it or the price of an asset? I didn't really understand how that was being sold. And it really wasn't at the time.
It wasn't until I came across a forum thread on the business of finance board that I saw basically the enterprise strategy of Chainlink. And this was mid-2018. And so this was a year before Mainnet, before, basically, anyone had really heard of the project or really knew what the oracle problem was. And that was a deep link pill that just completely changed my view on the crypto ecosystem.
And so from that point on, I was basically fully linked pilled. And it was in 2019 when I started my Twitter account when the Chainlink crypto Twitter community was basically a few dozen frogs, maybe battling with the XRP community. But I kept answering people's questions about Chainlink and debunking the FUD and misinformation. And then I kind of specifically been taking a facts and logic first approach rather than just based on the motion and ad hominem attacks that a lot of people like to do, unfortunately, on Twitter.
And so I just ended up growing my following from there, became a Chainlink community ambassador, and now I'm basically helping just educate the community through different content streams and through these types of podcast conversations. So, yeah, that's been my journey. I actually dropped out of school about a year ago. And so I'm doing this full time now. So it's been quite the journey. And I'm very blessed that I have the following I do and so many people are interested in the vision of smart contracts as the superior form of digital agreement as a whole. So that's my background.
Crypto Texan: Yeah, I guess more of just a cultural question from the Chainlink community. What's the story behind your avatar? And what is the significance of frogs in the Chainlink community?
ChainLinkGod: Yeah, it's funny. I would say that there's the team and then there's the community. The team initially in 2017, 2018, they were just heads down building. The community itself, basically, the grassroots growth. By just people following on 4chan, the infamous 4chan on the business and finance biz board, they basically launched on the Chainlink and there wasn't really much information at the time. So they were basically digging for breadcrumbs.
And so the 4chan is fairly well known for their mimetic abilities. And so that's where a lot of the frog culture, the Pepe/Apu Apustaja type memery came from and that's where Chainlink community really got its roots. And so that mimetic approach just carried over to crypto Twitter, where a lot of the community is now. Now it's split across, that a lot of it is own crypto Twitter now, so the mimetic is just carried over.
And so that's why and the initial community was literally all frogs. It's a little more diversified now, but that mimetic energy is always carried forward and it's always been an effective signaling mechanism, I suppose, around Chainlink, but it's just like the power of mimetics, cannot be understated. So that's just carried on continuously.
Crypto Texan: Yeah. And so how did you get started? Did you just start tweeting threads about what you were learning about Chainlink on Twitter? Or were you on Reddit educating people? Or was it 4chan? How did you ... I mean, you had to have started somewhere to get to the point that you were today. So how did all that start?
ChainLinkGod: Yeah, I would say in early 2018, I used to use Reddit as the source of crypto news. But it was horrible, admittedly. There was just not much alpha. So I came across 4chan. And that's where a lot of the breadcrumbs I came across. That's where I have a lot of my initial knowledge about the scope and power of Chainlink, some of the different services that were being explored at that time.
It wasn't until really joining crypto Twitter in early 2019. I mean, that initially started as literally just like a shitposting account of joining in the mimetic fund. But I just kept continuously researching all the information that was available from the Chainlink team and just in the ecosystem. I was always continuously learning about smart contracts on the Ethereum ecosystem. DeFi was very, very early stages. I mean, I think it was around the time Compound & Uniswap launched. And I dove into using those protocols and saw how if DeFi were to expand, we really needed this oracle thing, which happened later that year.
And then just from there, I just read every public information and just tried to break down complex topics very simply to people. But that approach evolved over time where I improved how I would explain things to people, and people just formed around me as a schelling point about community education. So as I was educating people, I was also learning myself. So it's a two-pronged process. It's synergistic in that regard.
Crypto Texan: Yeah, I've talked about this with some other people on the show and just in general that that's where I got a lot of my information back in 2017, 2018 was cryptocurrency, Reddit. And I don't know if you've been on there lately, but it's so bad. It's just all shills and doom, I don't know. Have you been on it lately?
ChainLinkGod: Not in a while. But last time I checked, they were still stuck on the same 2017 era coins VeChain, Nano, XRP. I looked at it, I'm like, "Nope. No, thanks."
Crypto Texan: Yeah, that's how I am when I see people shilling VeChain. I haven't thought of VeChain in forever until you just said that. Yeah, that's interesting.
But, yeah, let's get back to Chainlink. So Chainlink has incredible product-market fit in just smart contract ecosystem in general. And I think that's because smart contracts are a great, innovative technology. But they do have their own shortfalls. And that's where Chainlink comes in. Can you just describe for us what are some of the shortfalls of smart contracts and what is Chainlink's role in addressing those shortfalls?
ChainLinkGod: Yeah, sure. So fundamentally, blockchains themselves are immutable ledgers. They get their security model by basically generating very strong consensus about the validity of transactions. So sending tokens, interacting with a smart contract with coded logic. But part of their security model is that they're isolated from the external world. So all you need to run a blockchain node is the historical data and staying in sync with the network. You don't have any other dependencies, which makes the ledger incredibly strong and immutable, but at the same time, it means these blockchains cannot connect to external data systems.
Meaning, if you have a smart contract, like a money market, and you need to know what the value of this collateral is, you can't actually go out to an exchange or any other data source to fetch that information. It's like an information void. And that applies to any type of data that exists in the real world. So whether data for insurance or randomness data or GPS location or just literally any type of data that doesn't exist already on the blockchain because the only data on the blockchain is data that was generated on blockchain, like account balances and transfers.
So what oracles are is an additional piece of infrastructure that acts to connect blockchains to the real world. So rather than just being able to create some tokens and swap some tokens around, now you can create smart contract applications that are triggered based on real-world data. So like I mentioned, that could be an insurance agreement based upon the weather conditions in a specific foreign land area.
So you can create parametric insurance. Or that could be a DeFi money market or a synthetic derivative smart contract that uses a price feed, which is the most popular use case of Chainlink oracles that allow you to basically use your tokens in much more powerful ways, generating decentralized algorithmic stable coins, borrowing and lending assets, leverage trading, these different types of financial primitives. The vast majority of them rely upon external data.
And so what Chainlink offers is not only a connection to the real world but a secure and reliable connection. So oracles themselves, like Chainlink, are decentralized across multiple layers in order to provide an extremely high-level guarantee that the data that you're consuming in your smart contract is accurate and will be delivered in a very reliable manner.
So fundamentally, if you don't have oracles, then you just can't fulfill the vast majority of smart contract use cases because most contracts need an input in order to execute an output. So I really think of blockchains and oracles as the two pieces that are required to actually create smart contracts. You can't just have one or the other, you really need to have both. And then now you can create actually useful applications on these decentralized infrastructure networks.
Crypto Texan: So in summary, what I'm getting is that blockchains basically live in their own isolated world where the only data available for the blockchain is that information that the blockchain has created or that lives on the blockchain already. And oracles basically bring outside information that doesn't live on the blockchain to the blockchain for the smart contracts to operate appropriately.
So I guess two questions that we have here is, one, how does Chainlink assure its own security? And then the second question would be, how does Chainlink assure the, I guess, accuracy of the data that is being provided to the smart contracts?
ChainLinkGod: Yes. So the answer to those questions are a little bit intertwined. So there's basically two fundamental methods and they're fairly similar to how blockchains are secured as well. The first is decentralization. So the same reason why blockchains are extremely immutable and censorship resistance is because you have multiple entities, independent entities, working together to come to consensus. And that's effectively how the Chainlink network works, where the Chainlink network isn't actually a single network. It's a framework where you can build decentralized oracle networks.
And so like the Ethereum to USD price feed on the Ethereum network is made up of 31 independent oracle nodes that come to consensus. And so that way, you would need a majority of those nodes to become corrupted in order to affect the price. And so in that way, you have this decentralized consensus.
The other aspect in terms of network security are the economic incentive. So the same reason why Bitcoin miners continued to be honest in mind and extend the chain is because they're getting paid in Bitcoin. And they don't want to devalue their Bitcoin or their ASIC miners by being malicious. So they perform honest work for the network in order to not basically crash the price by being malicious and doing network attack.
And it's the same thing on the Chainlink network, where node operators are getting paid in link tokens. And so they have an economic incentive to continue operating, honestly, because they want to continue earning revenue. They want to grow the revenue as the network expands. And they don't want to devalue their holdings in the infrastructure and all the time and investment that they put into the network. So it's a combination of the decentralization where no single entity actually controls the network and the economic incentive, where each individual entity has an incentive to be honest because it's more profitable to be honest than to be malicious.
So that's how like the networks themselves are secured. There's more nuances in terms of how a specific service is secured. But in terms of how does Chainlink generate accurate data, that comes down to how data is sourced and aggregated. So with a Chainlink, price feed is probably the best example. You have a collection of, let's say, 31 oracle nodes, each one of those oracle nodes are actually found in multiple data providers and aggregating the response. So that way, the network is not depending on a single data source. But each one of those data sources is actually a data aggregation firm like CoinGecko or Brave New Coin, CORE market cap, where they actually aggregate from multiple decentralized and centralized exchanges in order to generate a volume-weighted average price.
So at that point, you actually have multiple layers of aggregation. You have the data providers you fetch for many exchanges. You have the nodes that fetch for many data providers and then the networks which aggregate for many oracle nodes. So that way, any outliers, any flash crashes, any deviations are actually automatically filtered out through a multi-tier aggregation strategy.
So through all these combinations, that's how the Chainlink network has continued to run extremely reliably, even during extreme network congestion on the Ethereum network and even during extreme market volatility, which is usually when network congestion happens and more oracle updates are actually needed. So there's a lot more nuances and other approaches, but at the high level, those are the fundamental approaches taken.
Crypto Texan: Okay. Do you have any idea how many nodes are operating on the network currently?
ChainLinkGod: Yeah, so there's the nodes that have been security reviewed and have basically a time-tested history. And I believe that's around 50 to 60. And then running a node itself is inherently permissionless. So we see data providers like the Associated Press and AccuWeather, they actually launched their own Chainlink node in order to provide their own data on chain directly. So there's a lot of different types of nodes. But it's not like a blockchain where anybody could just spin up a node and then you just set and forget it and just let it run.
An oracle node is much more hands-on because you need to configure it, you need to monitor if the data sources are accurate, you need to monitor your UCaaS balance. So the Chainlink network's basically been honed in on the most reliable and the most secure infrastructure providers in the entire crypto ecosystem. So that's like Swisscom, Deutsche Telekom. That's a bunch of different proof of stake validator pools that already run blockchain infrastructure. So it's really about the quality of the nodes rather than the quantity because having more nodes isn't strictly better if there are a bunch of low-quality nodes.
Crypto Texan: Okay, yeah, I see what you mean there. And so if you do have a smart contract that's pulling data, I guess, from the AccuWeather Chainlink node, it feels not as decentralized, right, if there's only one node providing that information or there are multiple nodes providing that type of AccuWeather information.
ChainLinkGod: Yeah, you're right. It's a different model. Price feeds are decentralized, many nodes, many data sources. But there are some situations where if your conditions for settling your contract and you trust the AccuWeather data source, then the best person to give you that data is AccuWeather itself. So you can actually combine data from multiple, this kind of first-party oracle nodes together. But sometimes only a specific data provider actually has access to that information, like a AML and KYC provider, where they have a proprietary mechanism for determining identity.
There's only going to be one entity who has that data, meaning the entity who generates that data is the best person to deliver that data on chain. But Chainlink fundamentally supports both models. So if you need lots of data sources and you need a big decentralized network, you can deploy that on the Chainlink network. If you have a one-day trust, like an enterprise back-end system, then you can have these experience infrastructure providers run the node or you can have the data provider itself run the node. So it's really about choice and flexibility. It's up to what the user needs.
Crypto Texan: Yeah, I think the AccuWeather thing is very interesting. What types of smart contracts are currently pulling that information from AccuWeather? Or what other types of contracts or protocols do you see pulling that information from them in the future?
ChainLinkGod: I think the primary ... I mean, what AccuWeather provides is basically weather data around any specific geolocation in the world. And so the primary use case for that, from what I've seen, is parametric insurance agreements. So things like Arbol and things like Etherisc, where they provide parametric smart contract insurance, specifically crop insurance. That's a smart contract where a farmer can engage in agreements on the Ethereum network. And then when the settlement time comes, it can query the AccuWeather Chainlink node in order to settle that agreement and payout as needed.
So that's one of the primary use cases where if you trust AccuWeather as a data source, then you can have AccuWeather directly deliver that data to your smart contract to settlement. You can aggregate from multiple sources, like the node that's connected to the Google NOAA weather source, different weather data providers through existing Chainlink nodes, but I think that's the primary use case of this node.
Crypto Texan: Okay, yeah, that makes sense. And I'm just thinking back when you look at loan agreements for commercial banking, if there is an external data that needs to be pulled to determine something in that contract, it is specifically listed, right? It'll say the base rate as printed in the Wall Street Journal. So it's almost sourcing data from the Wall Street Journal to go into that contract.
And this seems very similar, right, on the insurance side that if you're entering into an insurance agreement on a protocol standpoint, like you said, with Arbol or Etherisc, then you would know that they are pulling that data, that information from AccuWeather. So it's like there is an agreement between those two parties, right? Do you see what I'm saying there?
ChainLinkGod: Right. It's essentially like a service level agreement, where you enter this agreement, you know exactly what's going to settle this agreement. And it's going to be this reputable data provider who already provides weather for the biggest companies in the world. They're not going to manipulate your small little contract. If you don't depend upon them, well, you know what source it's using, so you could choose to use a different contract. So it's all about the transparency there.
Crypto Texan: Yeah, that makes a lot of sense. So what other types of data feeds are out there on the Chainlink network that you feel like are very interesting? Obviously, price is a big one. And the verified randomness is another one. But what are some other interesting ones that other people might not know about?
ChainLinkGod: Yeah, there's a lot of different services on the Chainlink network and they're coming to different buckets. In terms of the data services, I would say the other one that people don't, I feel like, know enough about is proof of reserves. So that's essentially a data feed. But rather than financial market data, it gives you data on the backing of an on-chain token. So for example, Wrapped BTC has a proof of reserve feed that delivers on the Ethereum network how much Bitcoin is actually backing WBTC.
So that way, if you have a smart contract, you can actually verify that this wrapped token is backed by the tokens on another network that it says it is. And that same model can be employed for stable coins, like it already is for the TUSD TrustToken, where you can validate how much US dollars are actually backing this token as validated by a Chainlink oracle network. So that could provide an additional layer of security for your protocol and just greater transparency for users so they know what's actually backing these tokens based on on-chain data.
Kind of an interesting use case, things like the CelsiusX DeFi bridge from Ethereum to Polygon and it's also connected to Dogecoin and Cardano. That is a token bridge between chains but uses proof of reserves to actually verify before minting wrapped tokens that there actually is collateral backing those tokens. So proof of reserve acts as an additional layer of security or token bridges, essentially. But that's on the data feed side of thing.
Chain link oracle networks are not limited to just data. They can actually provide off-chain computation as well. So as you mentioned, that's verifiable randomness function, VRF, where you can get verifiable random numbers. Usually for NFT mints. But there's also things like keepers, where keepers is a decentralized network, which will automatically trigger smart contracts on your behalf because smart contracts don't actually execute themselves. You need somebody or something to ping and poke the contract to execute a function.
Keepers can basically monitor contracts if a liquidation needs to happen and automatically trigger that liquidation as needed. So you don't have to rely on a centralized server. You don't have to rely on a developer waking up at 1:00 a.m. at the night to trigger a rebase function on an algorithmic coin. So this is computation services that use the same exact nodes that already secure $60 billion in price feeds.
And I think something that hasn't been released yet but I'm extremely excited for is the Cross-Chain Interoperability Protocol or CCIP, which uses these Chainlink nodes in order to communicate and transmit data between one blockchain to another. So that secure infrastructure could be used to create token bridges but also be used to transmit data and tokens across chains. So you can have a cross-chain automated yield forming contract that will deposit your tokens into it, it'll be deposited into yield farms across the multi-chain ecosystem, automatically moving it to get the highest yield and returning it back to you on the chain you're already on when the yield sources are dry.
So I think that has a lot of potential and that cross-chain interoperability goes far beyond just data feeds. I think people think oracles is just about data. But really, it's about everything that a blockchain can't do. Chainlink could provide the off-chain infrastructure. So I think there's a lot of services that are very interesting that people should really look into.
Crypto Texan: Yeah, would you say arbitrage bots? Do they utilize Chainlink oracles as well or off-chain computation?
ChainLinkGod: I wouldn't say so much. I think arbitrage bots mostly run through flash bots and just work on AMM decentralized exchanges, which AMMs are one of the few smart contracts that don't need oracles because they're just a liquidity pool balanced by the market. But Chainlink price feeds are required by liquidation bots. So when you're liquidating a position or Aave or compound, you do need to depend upon what the response is from a Chainlink data feed.
And another service that's being developed by the Chainlink team is the fair sequencing services, which is a solution which aims to mitigate and minimize the detrimental effects of minor extractable values. So that's something that the team is working with Arbitrum in order to have a fair transaction ordering mechanism in order to minimize things like front running and sandwich attacks and value extraction from the ecosystem. So an inverse solution, it's minimizing NAV opportunities and value extraction from people.
Crypto Texan: Okay, what happens if there is a malicious node or a malicious actor in the network? How does the network defend against something like that? Is there slashing involved?
ChainLinkGod: So currently, in the network, if just a single or even a few nodes are malicious, it's not going to actually impact any data feeds because they already are made up of many entities. So realistically, they would get kicked out of the network because the users don't want to rely upon that node anymore. They will lose all their reputation and lose all future revenue. And protecting network as a whole is the implicit incentives that if a network is majority malicious, then they're basically going to collapse the value of the token to get paid in and then they hold.
That's the existing security model of the Chainlink network but an additional layer of security is explicit staking or the locking up of link by Chainlink nodes. And so that's something that's also under development where Chainlink oracle nodes within a network have to explicitly lock link in a contract. And if they deviate or the network as a whole deviates, then they lose those link tokens as an additional punishment for being malicious or deviating. And so that's something that will roll out over time in order for the Chainlink network to actually scale even further to greater amounts of total value secured than it does today.
Crypto Texan: Yeah. So what are Chainlink's main competitors in this space? I mean, I can think of banned protocol, the graph, API3 maybe. Who would you consider your main competitors in the space? And how are they different from Chainlink and what the Chainlink network does?
ChainLinkGod: I think that there's theoretical competitors and then there's the actual competitors, I think. In terms of price feeds, there isn't any real competitors, right? If you just look at the data and see the number of integrations in terms of banned, most banned users have already switched over to Chainlink or if they haven't, it's because Chainlink is still integrating that blockchain.
In terms of things like API3, they're still in the process of launching but are not necessarily offering anything substantially different than what Chainlink offers. I think that in terms of price feeds, the vast majority of the ecosystem already uses Chainlink price feeds. The only competitors exist on really networks for Chainlink price feeds haven't launched yet, where it's still being integrated like Solana and Terra. As Chainlink price feeds launched on those networks, with the time-tested security of Chainlink price feeds, I think we're going to see the same thing that we saw happen on other blockchains, where projects begin to shift over and use Chainlink price feeds.
I would say the most competitive space right now, which most people probably agree with, is the cross-chain operability space. So that space is a much more competitive where there's already established, already created bridges, though a lot of them continue to get exploited and hacked, especially recently. But that space is definitely much more competitive, much more different approaches just on token bridging.
What Chainlink already provides in terms of price feeds, there just isn't really that many realistic competitors in terms of adaption or even just in terms of network security or economies of scale. So that's my perspective.
Crypto Texan: Yeah, I think another thing that some protocols might implement from a price feed standpoint are T-WAPs or TWAP, I'm not really sure what that colloquial term is there. But can you explain what those are and why protocols would even utilize these versus Chainlink?
ChainLinkGod: Yeah, that's a good question. So what you're referring to is the time-weighted average price, which is summed up as being a TWAP. Basically, TWAP is when you use an on-chain decentralized exchange as your oracle. So let's say there's a liquidity pool on Uniswap. Theoretically, you could use the exchange rate on that pool as an oracle.
In reality, if you just divide the balances, you're very susceptible to flash loan attacks, which a lot of protocols got wrecked by that a couple of years ago when they were just taking the balances and dividing them on Uniswap. So decentralized exchanges started to offer a TWAP, which is basically the price of an asset weighted over a specific amount of time. And this is a solution which, on paper, sounds idealistic, but when you dive into it, a TWAP fundamentally is a lagging price indicator. Meaning, you basically have to choose between tamper resistance and accuracy where the longer you make the time sample.
So let's say you take the average price over an hour, that's going to be more tamper-resistant than the average price over 10 minutes. But it's going to be less fresh during volatility. So if the price moves significantly, it takes a long time for the price to actually catch up to that point.
I wrote an article on my blog, SmartContent, where I dive into a lot of the nuances of TWAP oracles. But fundamentally, they don't provide market coverage because you're only tracking a single version of a single DEX on a single blockchain with a single trading pair, which is not the same thing as the market-wide price that Chainlink tracks through a volume-weighted average price.
So a lot of protocols, not a lot but some protocols gravitate towards TWAP initially because they'll want to list very low liquidity tokens, tokens with very little liquidity where it's not necessarily safe to launch an oracle network at all. But people will integrate a TWAP oracle to support it in a money market. But because the asset is so low liquidity, the price ends up getting manipulated and the TWAP oracle misreports. And then the protocol gets exploited. So it doesn't matter the amount of liquidity that a TWAP oracle or a TWAP liquidity pool or TWAP oracle is being taken from, it's really not safe to use a TWAP in any conditions.
Chainlink price feed will always provide more accurate data because it tracks the whole market. And it's going to provide more fresh data because it's the current volume-weighted price, not the price over an average previous amount of time. So it's an unsafe design. But when there's not a Chainlink price feed, protocols that are trying to capture the market and support a lot of tokens will take on additional risk by listing these very risky assets with these very risky oracles, which is unfortunate. But the best solution is basically to integrate a Chainlink price feed when there's enough liquidity to support one safely.
Crypto Texan: Yeah, how would protocol ... If there is a low liquidity token that they want a price feed for, how would they try to get that get price feed implemented on the Chainlink network?
ChainLinkGod: Yeah. So realistically, when a price feed for a token is launched, projects begin to implement products around that token because the data is now available. So when a price feed is launched for a token that has very, very little liquidity, products start to be built around that feed. And then because there's just so little liquidity, the price could be easily pushed in one direction or another. The oracle network will accurately respond with a market-wide price. It's just that the market-wide price is very easy to push around.
So realistically, you don't even want to really use a token in a financial product that requires a price feed if there's not enough liquidity for it. Projects still need to push an initial source of price data. So sometimes what they'll do is they'll start with the TWAP oracle, they'll bootstrap liquidity for the token, protocol own liquidity or other liquidity incentivization mechanisms, which will then allow a Chainlink price feed to be safely launched. And then they can upgrade their system over time.
So TWAP can be a stepping stone to integrating a Chainlink price feed once there's more liquidity, but it shouldn't be the end-all be-all solution that you use forever in your protocol.
Crypto Texan: Yeah. I always keep thinking like ... I don't know where DeFi would be today if Chainlink didn't exist. And so it makes me feel like Chainlink is a money lego. But I definitely wouldn't consider a DeFi. And I don't think the majority of the Chainlink community does, too.
And there was such a long time when we had the DeFi Pulse Index and we didn't have the Data Economy Index out quite yet, that we had users and DPI holders constantly telling us to put Chainlink in the DeFi Pulse Index. So what are your thoughts there, is Chainlink DeFi? Is it Web3 infrastructure? How would you consider it?
ChainLinkGod: Yeah, I think my views have changed over time. I think that it's hard to discern it because Chainlink does power the vast majority of DeFi. But I really think of it more as infrastructure itself. It's a decentralized network. It's not necessarily an application, which is usually what DeFi is determined by. If you are a money market or you're a DEX, then you're an application and you live within the DeFi ecosystem. But Chainlink is not something used directly by [inaudible 00:34:39], rather it's used by DeFi protocols in order to create their products.
So I really think it's more about infrastructure. It's more akin to Ethereum and blockchains in terms of where it sits in the stack rather than the higher-level DeFi protocols or even the above aggregators, like Zapper and whatnot. So I think it's much more lower-level infrastructure that powers DeFi. But not just DeFi, also NFTs as well and traditional products and even domain names and different verticals that it's not just DeFi.
Crypto Texan: I meant to ask this earlier, but which layer one smart contract protocols does Chainlink provide data feeds for right now?
ChainLinkGod: So the full list is in the Chainlink docs, but it's about a dozen primary blockchains. So Ethereum, Polygon, BSC, Avalanche, Arbitrum, Optimism, Polygon, Starkware, Heco, Gnosis chain or xDai, and I think there's a couple other as well. But it's like a dozen of the primary blockchains. And I know that the next push is to get some of these more non-EVM chains supported like Terra and Solana, which will be significant pushes.
So the Chainlink network already supports the vast majority of the DeFi ecosystem, most of the top chains, but is always continuously expanding to support even greater number of blockchains to basically support developers wherever they want to build.
Crypto Texan: Yeah. So just given that oracles like Chainlink do serve those data feeds to many different blockchains, has the Chainlink community managed to remain more chain agnostic? Or do they still engage in some similar tribalism like the rest of crypto Twitter?
ChainLinkGod: I think there's a mixture of both. I think the vast majority of people who understand Chainlink understand the value of being chain agnostic, of being basically credibly neutral, where Chainlink doesn't pick a blockchain winner. It's going to support every blockchain. I think most people recognize that value. But at the same time, they may have a personal preference/bias or they personally really like using Avalanche, or they really like using Arbitrum or they really like using Solana or whatever.
I think those are compatible in terms of people have preferences and may not like the specific strategy of a specific blockchain. But at the same time, Chainlink is going to power the DeFi applications on that blockchain, which is great for them. So you may have a personal preference, but it doesn't matter what blockchain wins and gets the network effects. Or if it's super distributed in multi-chain or it all goes to one chain, those applications are going to be powered by Chainlink regardless.
So I think that there's much less tribalism about chains in the Chainlink ecosystem than other ecosystems. But at the same time, I think people will continue to prefer specific networks and debate them on their merits.
Crypto Texan: Yeah, I think the Index Coop, we've determined that the Web3 infrastructure, the data economy on the blockchain might be a little misunderstood by the general public and it definitely hasn't had the same push or the same notoriety as DeFi protocols have had or Metaverse, NFT projects have had.
Do you feel like that as well? And why would you think that that might be the case? And as I say all this, I think Chainlink might be in a league of its own because you do have the Chainlink marines that are very, very good reply guys on Twitter.
ChainLinkGod: Yeah, I think every community has its own niche that ends up getting filled over time. I think that the current crypto ecosystem, it gets stuck in specific trends, where it'd be like an L1 rotation thesis and then there'll be these new 10K profile picture NFT mints. But I think the underlying infrastructure and the products that actually meet a real demand in the long run will see the most significant network effects and the most adaption, regardless of what the current hype of the ecosystem is right now.
So I think if a protocol is focused on the long-term approach, they're more than likely going to succeed and went out than a protocol focused on short-term price action, short-term developments, short-term money printer schemes. So I think that every protocol has unique approach, but with a long-term oriented view, that's where you really stand out.
Crypto Texan: Yeah, I think one of those trends too right now is ZK technology. I feel like that seems to be a pretty big topic of conversation right now in the space and a pretty big narrative. What relationship or future do you think Chainlink has with ZK proof technology? And what do you think that might look like in the future?
ChainLinkGod: Yeah, there's two approaches there. In terms of when we talk about ZK Rollups, the Chainlink is already supplying data feeds to dYdX, which is a standalone ZK Rollup chain. And so any ZK Rollup that launches in the future, zkSync, StarkNet, that's going to be supported by Chainlink services. And so a ZK Rollup scale ecosystem, Chainlink will scale along with it because it could run at the native speed of every blockchain. So it'll continue to support those environments.
In terms of much more synergistic how Chainlink will use ZK knowledge, ZK proofs, is in terms of DECO, which is a privacy-preserving oracle solution where you're able to prove that a specific piece of data came from a specific source without actually revealing the data itself, just specific facts about the data. So you can prove that you're over the age of 18 or you're proved that you have at least X amount of dollars in your bank accounts without actually revealing that exact value.
So you can create things like credit scores, you can create things like privacy-preserving smart contracts, where it's executed based on real-world data, but that data is not actually revealed on-chain directly. So I think DECO will introduce a lot of enterprise-type use cases where they can have much more granular control over how their data is exposed and used. And so with privacy-preserving solutions like that, that introduces a whole another world of data that can be brought on-chain and use to execute smart contracts.
So that's a long-term push towards privacy. But I think ZK Rollups in terms of scalability with ZK Rollups in terms of privacy, like DECO, are really the two angles which will really push the ecosystem forward and which Chainlink will be deeply integrated, empowering both essentially.
Crypto Texan: Yeah, do you see a future ... And I think you touched on KYC a little bit earlier, but a future to where Chainlink oracles combined with ZK technology could provide that private KYC, I guess, need that people are looking for, right? If I were to go to Coinbase and say, "Hey, this is my address, ZK-KYC." They could say, "Yeah, this is an address that Crypto Texan holds and manages without having to give any additional information." Or they could just say, "Hey, this is an address that is KYC and is good to interact with other KYC protocols."
I know that goes against, I guess, the philosophy of a lot of decentralized finance. But do you see that being a future or a different avenue that Chainlink can go through?
ChainLinkGod: Yeah, in the ecosystem as a whole, we'll probably see, at least initially, a split between the purest existing, no KYC permissionless, anybody can interact with the protocol unstoppable. But a lot of enterprises just can't touch that. At least in the current regulatory framework, they can't. So I think we'll see a parallel and we're already seeing this with Aave Arc. There'll be a parallel ecosystem of more permissioned applications.
But in order to bridge the gap, I feel like, between those two ecosystems and just make both sides more accepting of DeFi in this new stage, the support enterprises is, like you said, a privacy-preserving KYC solution. And so I think that comes down to a decentralized identity protocol. And that's something that can be built upon DECO, where you can basically use existing servers and different websites you already have your account information on, like your bank account, a government database, or any of these other kinds of official records, your school database.
You can basically use those existing data sources in a backwards compatible manner to generate credentials in a privacy-preserving way, so that you can prove yourself to a protocol, you could prove yourself to Coinbase or a centralized entity that you are not a sanctioned individual and any other information that you need to be proven in a privacy-preserving way. That way, people can bridge between the enterprise DeFi and the more permissionless DeFi in a way that still preserves the identity controls that are unfortunately needed by enterprises but in a way that's more privacy-preserving so you don't just dox yourself every time you make a transaction.
So I think that's probably the most pragmatic solution in order to resolving this KYC issue is just do it in a privacy-preserving manner. But I think it's something that'll be built out over probably a couple of years to actually see a decentralized identity protocol built out and scaled up to support such an ecosystem. But I think it's probably the most pragmatic approach unless something on the regulatory front significantly changes in this regard.
Crypto Texan: Yeah, what do you feel like is next on the roadmap for Chainlink that people should be aware of? I know CCIP and staking. So let's touch on those two topics and then tell us what else gets you excited on the roadmap?
ChainLinkGod: Yeah, sure. So the first is with Chainlink staking. So that's one that people have been excited for a while. Sergey, the founder of Chainlink, explained in a video earlier this year that additional implementation is rolling out sometime in the next year. And so that will significantly boost the security of the Chainlink, plus enhance the network's economics where link tokens will basically be locked up and then earning yield from the user fees that these protocols generate. So that'll be a significant shift in the economics of the network and the security of the network.
CCIP will be a huge advancement in the cross-chain ecosystems, many applications, cross-chain smart contract use cases, will be enabled by that. And I think that'll be a significant revenue source as well for the network as a whole, which combined with staking is a significant boost for the growth of the network as a whole, I believe.
So those kind of two initiatives, new product and increased security and economics are pretty significant that I think people are underestimating its impact on the network that's coming. But I think beyond that as well, a big focus and shift for the Chainlink network as an additional vertical is an enterprise abstraction layer. So effectively, this provides a way for enterprises to integrate themselves with blockchains, read and write to smart contracts through a standardized middleware layer.
So rather than having to pick and choose a specific blockchain to integrating onboard developers for that chain and build that infrastructure, they could just integrate a Chainlink node or integrate with a Chainlink network or a Chainlink node, and then gain the ability to interact with any smart contract on any supported blockchain in a very easy to integrate and very fast-paced manner, which will simplify the onboarding of enterprises to the ecosystem. You don't have to take a blockchain winner. You just integrate Chainlink and now you're future-proofed against any blockchain that pops up in the future since it'll be supported by Chainlink.
So that support of enterprises, I feel like, will be a significant push forward for Chainlink because a lot of things in the ecosystem today are very DeFi Degen focused, which is great for that segment. But in order to really push the adaption of the space forward, we really need to onboard some larger institutions and the enterprises who move a little slower but have a significant amount of capital backing them that will boost the growth of the ecosystem significantly. So that's where I see things shifting but very excited to see all of these products start to roll out in the near future.
Crypto Texan: Yeah, that's fascinating. And you're also the co-author of SmartContent777 or I guess it's SmartContent777 on Twitter, or maybe just SmartContent in general. Do you just want to give us a little background on that, just a chance for you to show your own project as well?
ChainLinkGod: Yeah, absolutely. So SmartContent is a publication that I write for along with the Crypto Oracle on Twitter. We've written about a bunch of different topics about Chainlink. We've written about TWAP oracles. We have a whole thesis on Chainlink as part of the God Protocols. That sets everything into context in terms of why Chainlink matters and how it works. And we have these different types of just things focused specifically on the Chainlink network.
And so if you want to learn more about Chainlink, then I recommend checking out SmartContent as well as the Chainlink blog on the education section. There's a lot of good resources there to learn about Chainlink.
Crypto Texan: Yeah. Another thing I want to ask you is on the shill your own bags segment of this show, what other projects out there are catching your eye right now? It could be DeFi, Metaverse, NFTs, Web3 infrastructure side. But what do you think people should be paying attention to?
ChainLinkGod: There's, I feel like, an obvious answer and a not so obvious one. I think the obvious one is just Ethereum itself. It's not necessarily like a DeFi project application type but the combination of the merge lowering issuance, the increased burning of fees from EIP-1559, plus the rollout of Rollups, which will significantly increase network bandwidth. I think we'll turn Ether itself into one of the most strongest assets in the crypto ecosystem, where it's actually net deflationary and yet sustainable at these fee levels and becoming cheaper to use via Rollups.
So I think that combination is significantly powerful. I think more and more people are talking about it now much more so than a year ago, but I think that's one that should definitely not be slept on. And the other one is not necessarily any one project but just the curve wars in general. I've been watching for the past year but just convex & curve and now the FRAX & LUNA aspect of it is very interesting to watch the war for stable coin liquidity and how the economics of curve are being leveraged for like hundreds of millions of dollars in bribes for governance power is being distributed to stakers, to CVX stakers at an annualized rate, which is very interesting.
It remains to be seen which stable coin really wins out and if there's really a winner, or it's just a continuous battle. But I think there's something always interesting happening in the DeFi ecosystem. And I think right now, there's a big war for the throne to be decentralized stable coin, which is, it's very interesting to watch.
Crypto Texan: Yeah, that is very interesting to watch. Definitely. And I honestly thought you were going to throw something out there like Etherisc or Arbol or something. What about some protocols that are utilizing the Chainlink oracles that you feel are really interesting, like those two?
ChainLinkGod: That's a good question. Yeah. I think the one I've always been aligned with is Aave. So Aave, I mean, you might think it's simplistic, it's a money market. But they've always been an innovator and a pusher. They're the ones who really pushed out the popularity of flash loans. That wasn't really a thing before Aave. And they're just continuously expanding to new chains with new features for more capital efficiency. They're going more multi-chain and cross-chain where you can send your Aave deposits across networks.
You can effectively ... Aave is like a core money lego building block that sits within a lot of the yield generation and a lot of the borrowing power within the crypto ecosystem. And of course, from the very day one, Aave has been powered by Chainlink price feeds. So that was ... When Chainlink price feeds first rolled out, they were one of the first users back when they were ETHLend and nobody really heard about them. And now they're like a powerhouse in DeFi. The largest money markets continuously innovating, continuously just expanding the assets in a very safe manner compared to some other markets.
So in terms of Chainlink project, that one always stands out to me and Synthetix as well. They're focusing more on futures and synthetic assets. They're continuously moving to L2 and adding more assets there that are, of course, powered by Chainlink price feeds. I mean, at this point, there are hundreds of protocols powered by Chainlink, specifically with Chainlink price feeds across so many networks. So if you throw a dart at DefiLlama, it's probably going to be a protocol powered by Chainlink that is worth looking into at the very least.
Crypto Texan: Yeah, yeah, absolutely agree. Yeah, you throw that dart at DefiLlama and that protocol is going to be integrating Chainlink, most likely. Yeah, we're getting up to the end of our hour here. But are there any other topics that you and I haven't touched on that you want to talk about or address?
ChainLinkGod: I think that one general point of discussion I've seen is something that was brought up by Vitalik is, is the future of the ecosystem going to be multi-chain? Or is it going to be cross-chain? And I think that the argument for multi-chain is that it's like you don't have this interconnected risk effectively, where you have these individual isolated chains that have their own ecosystem, but there's not much communication or interaction between chains.
Theoretically, it's the most secure but it's the most limited, while the cross-chain ecosystem allows people to bridge between environments in order to create cross-chain smart contracts. But we've seen more fun in that regard of the Ronin bridge hack, the Wormhole bridge hack, the Poly Network bridge hack. There's been a lot of bridge hacks with billions of dollars lost. And so people have questioned the cross-chain thesis. But I think the reality is just, number one, we haven't seen a secure cross-chain Bridge, which is where I think Chainlink CCIP will come to absolve and resolve that issue, just like Chainlink price feeds did with oracle issues a couple of years ago.
And then the second, I think that there's just user demand for cross-chain. It's not going to go away. People want to bridge their tokens across environments. And I think that a lot of bridges just haven't really focused much on security. And with CCIP and with it having an anti-fraud network, with it having automatic monitoring for fraud, monitoring for malformed messages, that we'll begin to see a cross-chain ecosystem that looks very, very different than it does today.
So I think that's my recommendation for listeners is that twofold in terms of the cross-chain ecosystem is going to continue to grow. It's been multi-chain, but it's going to keep growing to be cross-chain and bridges aren't going to go away anytime soon.
And secondary, I think that oracles are fundamentally much more than data and it's much more than just price data. That's the clear product-market fit but oracles basically provide all the functionality that blockchains can't. So that's secure off-chain computation and that's cross-chain interoperability. And those will be significant opportunities for both developers and for the Chainlink network from the perspective of stakers and from the perspective of node operators who provide those services.
So I think that the ecosystem is going to continue to grow interconnected. And there was a point made earlier about people being tribalistic between chains. I think the reality is that you're going to have a preferred chain, but the reality is that everyone's going to have a different preferred chain. So if you want to really bootstrap the growth of your ecosystem, you need to become more connected with other ecosystems. So that's just a general point on multi-chain and cross-chain in general, but I think it's a worthwhile discussion point.
Crypto Texan: Yeah. And on that same subject, do you have any thoughts on Arbitrum Nitro or fully production-ready nodes on their devnet, the suite of services that they have, bridges and sequencing, sounds somewhat similar to Chainlink labs. Just wondering if you had any thoughts on that specifically.
ChainLinkGod: Yeah, I actually just saw that announcement earlier today. I haven't read through the article yet, but I definitely will. I will say that Arbitrum and Chainlink are working closely together on first sequencing services. So once FSS on the Chainlink network has rolled out, Arbitrum will be working very closely to decentralize our sequencer and use that to bootstrap transaction ordering guarantees.
So I'm definitely going to look more into Nitro. I know that's a big part in reducing costs for Arbitrum and making things more compatible and more efficient. But I think there will continue to be very significant synergies between Chainlink and Arbitrum.
Crypto Texan: Okay, so you don't really see that as a competitor then?
ChainLinkGod: No, I don't see Chainlink competing with any blockchain directly. Even if they offer some specific feature that Chainlink might, there's always going to be some feature that they don't offer, right? You may not need keepers for specific network, you may not need VRF for specific network, but there's going to be some service, some Chainlink service that they need, right?
So Chainlink will provide privacy to blockchains that don't have privacy. It'll provide scalability to blockchains that don't have scalability. It'll provide order fairness to chains that don't. So there's always going to be some infrastructure requirement that a blockchain will need. And most of the time, that's going to end up being filled by Chainlink oracle services.
Crypto Texan: All right, yeah. Makes sense to me. Yeah, I haven't really dug too deep on that either. That was a question we had in the chat. I just wanted to make sure we got that addressed. But that's interesting. Something I need to look into as well.
Well, CLG, ChainLinkGod, this has been a real pleasure. Big fan of the protocol. And it's obviously just a base layer foundation for what powers DeFi smart contracts and even the Metaverse. So I'll just say, to end this off, where can people go to find out more about you, Chainlink, and SmartContent?
ChainLinkGod: Yeah, absolutely. I think the primary place is to go to my Twitter account, which is just the same username @ChainLinkGod. On there, you can see links to SmartContent, my blog. You could see links to my podcast, the ChainLinkGod podcast, and you can see a link as the pinned tweet of a list I've compiled of all the best Chainlink resources, podcasts, videos, blogs, infographics. Everything you need, it's basically at the top of my profile Twitter. So that's what I recommend checking out.
Crypto Texan: Awesome. Well, everyone who's listening live in the Discord, thank you for listening live. This episode of Conversations with the Coop is being recorded. And so we will get this out in about a week. ChainLinkGod, thanks again. It's been a pleasure to have you on the show.
ChainLinkGod: Likewise. Thanks for having me on. Pleasure.
Crypto Texan: All right. Bye.
Host: @Crypto_Texan
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Transcript: @0xMitzy / @Crypto_Texan
Conversations with the Coop - ChainLinkGod - Chainlink