Chainlink ve Decentralized Oracle Networks

Alperen Tunçkıran
7 min readSep 12, 2023

A power that connects blockchain networks with the outside world.

When we think of Chainlink, we only think of enabling off-chain data to be used on-chain by blockchain networks and smart contracts. But Chainlink is much more than that.

If blockchain networks represent Galaxies, Chainlink represents the entire Universe with its own Galaxies.

  • You can perform off-chain computation on Chainlink, verify and use the outputs of this computation as on-chain.
  • You can store on-chain/off-chain data on Chainlink and use this data wherever you need it.
  • You can create your own Decentralized Oracle Network on Chainlink.

Welcome to the first article of the series where we will dive deep into the Chainlink Universe.

1. Decentalized Oracle Network

Decentralized Oracle Networks (DONs) were created to enhance and extend the functionality of smart contracts on the “target blockchain” or “main blockchain”.

Chainlink 2.0 is a collection of Decentralized Oracle Networks.

Various Oracle Networks can be deployed on Chainlink, such as CCIP, VRF, Functions and many more.

The Decentralized Oracle Network is a collection of nodes called “committees” that send data as “reports” to smart contracts.

A DON works as a “Blockchain Abstaction Layer”. It provides an interface for blockchain users and developers to access off-chain resources. It is also an important resource for Off-Chain Computation. It supports transactions on the main-chain and provides “hybrid smart contracts” that are secure and adaptive to current conditions.

Each Decentralized Oracle Network is a different network with its own rules. There are 3 main resources for a computing system:

  1. Networking
  2. Storage
  3. Computing
Red lines represent the direction of data flow and red boxes represent Adapters.
  • Executables are programs on the DON. These programs are executed by the DON nodes and provide clear, deterministic output.
  • Adapters connect external resources to the DON. They work bidirectionally.
  • Storage keeps the state on the DON. It enables communication with other Executables.

The biggest benefit of a Decentralized Oracle Network is that it can bootstrap to any blockchain. In this way, data can be transferred to or received from any blockchain.

2. 7 Key Design Goals in Decentralized Oracle Network Design

2.1 ) Hybrid Smart Contracts

One of Chainlink’s main goals is to combine on-chain and off-chain data into smart contracts called “Hybrid Smart Contracts”.

Smart contracts are deployed on blockchains and used on-chain. However, due to the scalability problem of most existing blockchains (long finality time, high transaction fees), smart contracts have limited possibilities. They also cannot access off-chain data.

For smart contracts to work to their full potential, they need to be divided into 2 parts,

  1. On-chain deployed Smart Contracts,
  2. Decentralized Oracle Networks that can execute Smart Contracts off-chain.

Other items include ideas that build on Hybrid Smart Contracts.

2.2 ) Abstraction Away Compexity

A Decentralized Oracle Network provides useful tools and interfaces to abstract developers and users from complex transactions.

For example, Data Feeds provides on-chain services so that developers can avoid protocol-level enhancements and operations.

2.3 ) Scalability

Blockchains cannot overcome the scalability problem. Blockchains that provide short-term and temporary solutions through protocol-level improvements are in vogue today.

New L1 networks are announced every month or new L2 networks every day to solve the scalability problem. Even though they are not much different from each other, thanks to their marketing skills, they can reach a certain user base and market value by making things that don’t exist yet look like they do.

Decentralized Oracle Networks offer the best off-chain scalability solution with “Hybrid Smart Contracts” and “Abstraction”.

In fact, DONs act as a “Decentralized Metalayer”. Instead of running complex applications on non-scalable blockchain networks, developers can use DON-built

They can run this application on Metalayer and save the output of the application on-chain to the blockchain.

In this respect, Decentralized Oracle Networks may look like an L2. But a DON is more like an App-Chain than an L2. They are developed and used for specific purposes. You cannot write applications on it, you can run specific applications and write the output to the blockchain.

Thanks to a framework called “Transaction Execution Framework (TEF)”, DONs will be able to create more efficient integrations into L2 networks. This will greatly benefit the scalability goal they are trying to achieve.

We will talk about TEF in more detail…

2.4 ) Confidentiality

Blockchain networks maintain a public ledger of transaction history. This is a major blow to data privacy. This open ledger delays the adoption of blockchain by data providers and large organizations.

Decentralized Oracle Networks offer 3 main approaches to make this open ledger available to everyone;

-> Confidentiality-preserving adapter: There are 2 technologies planned to be used in Chainlink networks. DECO and Town Crier are technologies that will ensure user’s privacy and data security when oracle nodes receive off-chain data. I will talk about them in detail…

-> Confidential Computation: DONs can hide their computation from blockchain nodes because they have their own node cluster (committee). With Secure Multiparty Computation and/or Trusted Execution Enviroments, nodes can make their information invisible to blockchain nodes.

-> Support for Confidential Layer-2 Systems: TEF can be used for most Layer-2 systems, especially those that use zk-proof.

2.5) Order-Fairness for Transactions

The concept of decentralization has huge definitional preferences that can manipulate the masses. Most blockchains describe themselves as the most decentralized, but today this is not the case at all.

Validators can change the order of transactions at will, or the order of transactions can be manipulated by users due to the fee market, for which there are various attack factors.

Attacks like front-running can manipulate the order of transactions and ordinary users can suffer huge losses.

At this point, Chainlink offers a service called “Fair Sequencing Services (FSS)” as a solution.

With FSS, smart contract developers can ensure a fair sequence of transactions and protect users from attacks such as front-running and back-running.

The FSS will also help to ensure low transaction fees.

Transactions are transmitted to DON nodes and DON nodes rank the transactions. The ranked transactions are sent to a contract on the blockchain and recorded in the network. This is how FSS works.

4.6 ) Trust-Minimization

One of the intended goals of DON design is for the DON to create a “trustworthy” layer for users in a decentralized manner.

Some applications find blockchain networks more trustworthy than DONs. Chainlink is making several enhancements to create a trust-minimizing environment.

-> Data-Source Authentication: It is a tool for data providers to sign and share their data. This creates a chain of custody between the data provider and the data user.

-> DON Minority Reports: Small precautions taken in the DON network against false data being transmitted by DON nodes.

-> Guard-Rails: A set of rules on the target blockchain that will catch suspicious approaches and stop the contract/interrupt the transaction using smart contracts connected to DON.

-> Trust-Minimized Governance: A set of gradual updates to allow users to participate in system management and facilitate control. It also includes decentralized emergency response systems.

-> Decentralized Entity Authentication: Use of Public Key Infrastructure (PKI) to authenticate entities on Chainlink.

2.7 ) Incentive-Based (Cryptoeconomic) Security

Decentralizing the process of generating reports delivered to blockchains helps to maintain existing security even if DON nodes fall off the network.

LINK staking and slashing create a cryptoeconomic security model.

In Proof of Stake blockchains, the staking mechanism ensures consensus security.

In Chainlink, the situation is different. Chainlink aims to send accurate oracle reports. A well-designed staking mechanism for a DON leaves the attacker with nothing to gain against high-profit attacks.

-> A Powerful Adversarial Model: In blockchain networks, in exchange for a bribe to the next leader, the leader’s block data can be manipulated if the bribe amount is greater than the leader’s gain from producing the correct block. In Oracle networks, which node will provide data must be kept secret until its turn comes. And a “prospective bribery” (i.e. reward) to these providers prevents these nodes from committing fraud.

-> Super-Linear Staking Impact: For a successful attack, the attacker’s budget must be greater than the total staked value.

-> The Impact-Incentive Framework (IFT): It is an incentive mechanism to prevent fraud, in addition to the reward that DON Nodes will receive based on the amount they stake.
As the Chainlink user base increases, the rewards and incentives for DON Node Operators will also increase.

We will dive deeper into the Chainlink ecosystem. We will examine how we can scale blockchains using Chainlink, how we can access external services, how Chainlink Networks are cryptographically protected.

We built the First Galaxy of Universe.

Alperen Tunçkıran / Chainlink Community Advocate

Twitter : @blockofchain