May 2023 Summaries

In 2021, the global real-estate market was valued at approximately $29 trillion, highlighting its vast economic significance and widespread connection to individuals worldwide as renters, owners, or workers. However, the market is characterized by inefficiencies and illiquidity, prompting interest in tokenization—a process that leverages blockchain technology to represent real estate and its cash flows as digital tokens, potentially increasing liquidity, streamlining transactions, and enabling digital ownership. Tokenization can involve non-fungible tokens (NFTs) for whole properties or fungible tokens for fractional ownership, offering benefits such as better price discovery, lower transaction costs, and reduced fraud risks. Despite its promise, the widespread adoption of tokenized real estate faces challenges, including data authentication, wallet recovery, and large-scale implementation, with significant collaboration needed among Web3 projects, governments, and businesses to transform this $29 trillion market.

Web3 represents a new Internet infrastructure that leverages decentralized and distributed networks to enable peer-to-peer interactions, eliminating the need for intermediaries. It relies on blockchain technology, which offers security, transparency, and immutability, but is limited by the "blockchain oracle problem," as blockchains cannot inherently access real-world data or computation. Chainlink addresses this by providing secure data and computational capabilities, which have significantly contributed to the growth of decentralized finance (DeFi) and other Web3 domains. The text provides a tutorial on using Chainlink Functions, a decentralized serverless computing platform, to build a decentralized application that facilitates a digital agreement between a record label and a music artist. This involves deploying a smart contract on the blockchain to manage artist payments based on music streams, using APIs to fetch streaming data and send notifications, and ensuring secure integration with external data sources while maintaining cryptographic integrity. The tutorial covers setting up a development environment, deploying smart contracts, and simulating application execution on test networks, demonstrating how Chainlink Functions can bridge the gap between off-chain data and blockchain applications.

Blockchain games are gaining traction as a novel way to engage players, with major gaming companies like Square Enix, Nexon, and Ubisoft exploring the technology, though it is not universally applicable, particularly for fast-paced games like first-person shooters due to blockchain's limited speed and scalability. On-chain games, a subset of blockchain games, operate entirely on blockchain technology, with game logic and state stored in smart contracts, offering benefits like decentralization, digital permanence, and composability, but facing challenges such as limited speed, transparency issues, and susceptibility to botting. Despite these challenges, on-chain gaming allows for technical innovation and aesthetic diversity, enabling different user interfaces for the same game. Examples of on-chain games include HunterCoin and Dark Forest, both serving as experiments in decentralized game development and technology. The niche yet expanding community of Web3-native developers and players continues to explore and push the boundaries of what is possible with fully on-chain games.

Automating low-level maintenance tasks allows projects to allocate more resources to enhancing applications with growth-driving features, but choosing the right automation solution is crucial due to the risks associated with homegrown and various anti-pattern solutions. Homegrown solutions, though customizable, are time-consuming, costly, and lack economies of scale, while centralized solutions expose private keys and introduce single points of failure. Distributed systems can lead to false security assumptions and suffer from outages, and public bounty systems, though autonomous, often result in increased costs and unreliable execution due to gas price fluctuations and centralization tendencies. In contrast, Chainlink Automation offers a decentralized, secure, and efficient alternative by using a decentralized oracle network to perform smart contract upkeeps without exposing private keys, ensuring no single point of failure and reducing costs through gas-optimizing features. This approach enhances reliability and long-term sustainability even during network volatility, providing consistent support and technical assistance, making it a preferred choice for developers seeking robust automation solutions.

In this post, the authors delve into the challenges and solutions for parsing and verifying claims about JSON data in Zero-Knowledge Proofs (ZKP) without exposing sensitive information. Building on the previous discussion of TLS response authenticity, the focus here is on efficiently parsing the JSON to ensure claims about the data can be verified, such as proving a bank balance exceeds a specific amount without revealing the exact figure. The authors introduce a protocol that allows a prover to send a redacted JSON and a commitment to its scalar values, enabling the verifier to check the claim's validity while maintaining privacy. They highlight the complexity of parsing JSON in ZKP due to the hidden structure and propose a method where the prover partially reveals the JSON structure, allowing the verifier to parse it without ZKP. The process involves several checks to ensure the integrity of the data, preventing dishonest manipulation by the prover, and ensuring that the redacted JSON accurately reflects the original data's structure. This post is part of a series by Chainlink Labs Research Team on DECO, exploring secure and private data verification methods.

BRC-20 is an experimental fungible token standard created to explore the possibility of using ordinal inscriptions on the Bitcoin blockchain to store immutable data and develop semi-fungible tokens natively. Initiated by an anonymous developer named domo in March 2023, BRC-20 leverages the concept of ordinal theory, which assigns unique numbers to individual satoshis, allowing various data types to be inscribed onto them. Unlike Ethereum's ERC-20 tokens that rely on smart contracts, BRC-20 tokens embed JSON data into ordinal inscriptions, enabling users to deploy, mint, and transfer tokens without altering the Bitcoin protocol. Although still in its experimental phase, BRC-20 has generated significant interest within the Bitcoin community, with infrastructure providers starting to integrate it into their services. However, the creator acknowledges that BRC-20 is not necessarily the definitive standard for fungibility on Bitcoin, and the open-source nature of the project leaves room for further innovation and optimization by the developer community.

Artificial intelligence (AI) and blockchain are two transformative technologies with the potential to revolutionize industries and societal interactions. Their convergence could create a billion-dollar industry, enabling applications that leverage AI's productivity and blockchain's security and transparency. This integration can lead to intelligent automated systems, new business models, operational efficiencies, and enhanced decision-making processes. Use cases range from secure AI deployment and supply chain optimization to authenticity verification and financial services. Blockchain's transparency can address AI's decision-making opacity, while decentralized storage solutions can enhance data integrity for AI systems. Challenges such as interoperability, data privacy, and public awareness need addressing to realize the full potential of AI and blockchain, but their combined capabilities promise significant advancements in sectors like healthcare, education, and urban planning, potentially reshaping societal and economic structures.

Staking is a mechanism used in proof-of-stake blockchain networks like Ethereum to secure the network by locking up cryptocurrency tokens as collateral. Liquid staking enhances traditional staking by allowing staked assets to be used as collateral in decentralized finance (DeFi) protocols, providing liquidity and additional earning opportunities. Liquid staking providers manage user deposits, stake tokens on behalf of users, and issue new tokens that represent claims on the staked assets, which can be traded or used in DeFi. These tokens introduce liquidity but also come with risks such as slashing, smart contract vulnerabilities, and market volatility. Prominent liquid staking protocols include Lido and Rocket Pool, which offer decentralized services, while centralized exchanges also provide liquid staking but differ in custodial control. Chainlink Price Feeds play a crucial role in ensuring the reliability of liquid staking tokens by providing accurate data, thus supporting their integration into DeFi ecosystems.