September 2022 Summaries

SmartCon 2022 concluded with a surge of announcements impacting the Web3 ecosystem, highlighting Chainlink's pivotal role in bridging Web2 and Web3 through various initiatives and collaborations. The conference, featuring over 150 speakers and 100 presentations, served as a platform for industry leaders, developers, and community members to discuss the future of trust-minimized applications. Sergey Nazarov, Chainlink's Co-Founder, emphasized the network's advancements in his keynote, while collaborations like SWIFT's adoption of the Cross-Chain Interoperability Protocol (CCIP) showcased the potential for interoperability in capital markets. Noteworthy sessions included a panel with representatives from SWIFT, DTCC, and BNY Mellon discussing digital asset success and a fireside chat with former Google CEO Eric Schmidt on Web3 infrastructure's importance. Chainlink announced updates such as Economics 2.0, SCALE, and BUILD programs, alongside product innovations and partnerships with enterprises like LexisNexis and Deutsche Telekom MMS. The event also featured a unique contest, further engaging attendees and highlighting Chainlink's vision of a future driven by cryptographic truth.

The Web3 economy has seen remarkable growth, with digital assets reaching a market capitalization of $1 trillion, but the digital asset debt market remains underdeveloped due to the absence of standardized benchmarks like those in traditional finance. To address this, Chainlink and CF Benchmarks have introduced the CF Bitcoin Interest Rate Curve (CF BIRC), a pioneering benchmark for Bitcoin interest rates that aims to provide transparency, consistency, and clarity in the digital asset markets. This benchmark allows for more predictable lending and borrowing, enhances capital efficiency, and supports the development of digital asset derivatives markets. CF BIRC is designed to be market-representative, manipulation-resistant, and replicable, integrating data from various sources to reflect the Bitcoin lending market comprehensively. This new benchmark is expected to unlock numerous use cases across centralized and decentralized finance, such as enabling interest rate swaps, improving asset valuation, and facilitating more effective risk management strategies, thus fostering greater institutional adoption and growth in the digital asset ecosystem.

Chainlink BUILD is a program introduced as part of Chainlink Economics 2.0, designed to support and accelerate the growth of decentralized applications (dApps) within the Chainlink ecosystem by offering enhanced access to Chainlink services and technical support in exchange for network fees and other incentives. By aligning economic incentives, the program aims to foster mutual success between Chainlink and participating projects, including those in their early stages and established ones. Key participants, such as Space and Time, Truflation, and bitsCrunch, commit a portion of their token supply to the program to drive innovation and ecosystem expansion. Chainlink BUILD offers numerous benefits to participants, including prioritized access to new services, enhanced security, advanced technical support, custom data feeds, and robust monitoring, thereby enabling dApps to maximize the "Chainlink effect," which enhances their adoption and success in the Web3 space. Notably, the program also strengthens oracle networks' cryptoeconomic security and supports a wide range of hybrid smart contract use cases, contributing to the sustainable economic growth of both the Chainlink ecosystem and the projects involved.

Chainlink Labs has launched Chainlink SCALE, part of the Chainlink Economics 2.0 initiative, aimed at promoting the growth of blockchain and layer-2 ecosystems while ensuring economic sustainability for the Chainlink Network. This program allows participating blockchains and layer-2 networks to cover the operational costs of Chainlink oracle networks, such as transaction gas fees, to facilitate smart contract innovation. Notable ecosystems like Avalanche, Metis, Moonbeam, and Moonriver are participating by supporting oracle network costs and enhancing research and development. As these ecosystems mature, the responsibility for covering oracle costs is expected to shift to decentralized application (dApp) user fees, fostering a sustainable economic model for all stakeholders, including blockchains, dApps, and oracle service providers. Chainlink SCALE also aims to streamline operational complexities for Chainlink node operators while encouraging further network expansion and innovation within Web3 environments.

George Danezis and Dahlia Malkhi's article discusses various strategies for transaction execution in DAG-based BFT Consensus protocols, which are crucial for processing transactions at high throughput to match the ordering speeds of modern blockchain systems. The authors explore three main options for transaction execution: post-ordering off-DAG, post-ordering checkpoint on-DAG, and leader-proposed execution, each with its advantages and drawbacks. They also emphasize the importance of parallel execution to accelerate transaction processing, proposing methods such as exploiting transaction concurrency and utilizing concurrency hints for improved performance. Additionally, the article highlights the potential of zk-rollups to offload compute resources from validators and discusses other techniques like dependency graphs and splitting execution to enhance the efficiency of blockchain systems. The discussion reflects ongoing efforts to balance between the network and computational resources to achieve scalable and efficient consensus mechanisms in blockchain technology.

The text outlines a method for achieving high transaction throughput in proof-of-stake blockchains by utilizing a DAG (Directed Acyclic Graph) to spread and order transactions without requiring additional message exchanges. This approach separates the responsibilities of spreading messages and consensus ordering, allowing the DAG to function as a "smart mempool" that optimizes throughput while maintaining reliability, non-equivocation, and causal ordering. The method emphasizes simplicity and minimalism, operating in a view-by-view manner that requires only two broadcast latencies to reach consensus during stable network conditions. It also highlights how the DAG's properties simplify the consensus process by preventing leader equivocation and ensuring proposals are inherently justified through their causal history. Additionally, the text compares this method to other DAG-based consensus solutions and discusses its potential as a foundational algorithm for future developments like Fino, a BFT consensus protocol.

Decentralized finance (DeFi) lending traditionally relies on overcollateralization to mitigate the risks associated with pseudoanonymous users, but this approach limits capital efficiency. The development of undercollateralized lending protocols, enabled by technological advances like the DECO privacy-preserving oracle protocol, offers a promising solution by allowing reliable assessment of borrowers' creditworthiness without compromising data privacy. DECO, developed at Cornell University and acquired by Chainlink, uses zero-knowledge proofs to verify off-chain data, enabling secure and private undercollateralized loans. A proof of concept with Teller and Chainlink Labs demonstrated DECO's potential to lower collateral requirements by proving users' bank balances without exposing sensitive information. This innovation could significantly expand the DeFi market by integrating a vast amount of economic value while maintaining user privacy and fostering more efficient lending practices.

The Chainlink Fall 2022 Hackathon invites participants of all skill levels, from seasoned Web3 developers to beginners, to engage in a month-long event from October 14 to November 18, offering them opportunities to learn, build, and win in the rapidly evolving Web3 space. This hackathon provides mentor-led workshops, access to advanced tools and resources, and the chance to learn directly from industry experts, covering topics from basic blockchain and smart contracts to advanced DeFi and NFT development. Participants are encouraged to leverage the composability of Web3 technology and receive feedback from experienced professionals, facilitating the creation of standout decentralized applications (dApps). With over $300,000 in prizes, the event not only supports the development and deployment of blockchain applications but also aims to identify and empower innovative projects, offering significant opportunities for those confident in their ideas and execution. As the Web3 industry continues to advance, the hackathon presents a valuable chance for developers to enhance their skills and participate in the ongoing evolution of digital technologies.

In a detailed exploration of Byzantine atomic broadcast (BAB) protocols, the authors present an innovative solution that builds upon previous work on binary Byzantine agreement, extending it to multi-valued consensus. The protocol features a deterministic and unconditional safety mechanism, maintaining a low latency of three rounds while allowing for unknown and dynamic participation of nodes, including the fluctuating presence of faulty nodes. The approach employs block chaining and graded agreement, ensuring that honest nodes achieve consensus without conflicts, and supports the decision on a growing sequence of input values. Notably, the protocol improves upon existing methods by reducing the number of graded agreement invocations, thereby enhancing efficiency and practicality in environments where node participation can vary widely over time. This solution addresses significant limitations in previous models, particularly by allowing for the dynamic involvement of faulty nodes, which existing solutions without proof-of-work struggled to accommodate.

Web3, also known as the blockchain ecosystem or crypto economy, is revolutionizing user expectations by offering cryptographic guarantees, marking a shift from relying on trusted third-party service providers to trust-minimized applications. This transformation is driven by societal demands for enhanced privacy and security following failures of traditional institutions and platforms, as seen in incidents like Cambridge Analytica. As users increasingly favor end-to-end encrypted communications, the broader adoption of trust-minimized systems is anticipated across sectors such as finance, insurance, gaming, and global trade. Chainlink's oracle networks play a crucial role in this shift by providing the necessary infrastructure for both Web2 and Web3 systems to become trust-minimized, thereby enabling a cryptographically guaranteed society. These networks facilitate innovations like DeFi smart contracts, Verifiable Random Function (VRF) for gaming, and Proof of Reserve for stablecoins, demonstrating the potential for oracle-powered solutions to redefine digital relationships with secure, reliable guarantees.

Web2 applications often rely on traditional random number generators (RNGs) that lack transparency and can be prone to manipulation, necessitating user trust in centralized systems. Chainlink Verifiable Random Function (VRF) offers a solution by providing a cryptographically secure and verifiable source of randomness that enhances the integrity and fairness of applications across industries like gaming, marketing, and analytics. Unlike typical RNGs, Chainlink VRF generates random numbers with a cryptographic proof, allowing users to independently verify the randomness, thus eliminating the need to trust centralized entities. The integration of Chainlink VRF into Web2 applications can unlock new use cases, improve product transparency, and offer a competitive edge, while its recent compliance certification makes it suitable for regulated iGaming apps. This advancement represents an opportunity for Web2 companies to adopt Web3 technology and build brands characterized by fairness, integrity, and transparency.

Block-STM is a novel parallel execution engine designed to enhance smart contract processing by leveraging a pre-ordered block execution model combined with optimistic Software Transactional Memory (STM). Emerging from the Diem project, this technology allows for accelerated transaction validation on existing blockchain infrastructures without requiring modifications to the validator nodes. Building on ideas from distributed database projects like Calvin and Bohm, Block-STM simplifies concurrency management by executing transactions in blocks, ensuring deterministic outcomes that mirror sequential executions. It employs a "speculate-validate-redo" approach, where transactions are executed optimistically in parallel and then validated, with re-execution occurring if validations fail. Key innovations include task stealing and an ABORTED tag for simple dependency tracking, which reduce unnecessary re-executions and enable near-optimal scheduling. Block-STM's simplicity and efficiency have shown significant performance improvements, achieving over 17x speedup on 32 cores under low/modest contention, and have been integrated into the Diem blockchain core.