Smart contracts and the promise of virtual law
Imagine your flight has been cancelled. With no alternative flights available that will get you to your destination on time, it looks like you have missed that important business meeting you were travelling for. You book an Uber and head home. A day wasted. A big opportunity missed.
You consider calling the airline to see what redress is on offer. You know how it will go. More lost time. More anguish. Should you call your lawyer? Again, more time and expense and for what? Surely there is a better way you wonder.
Or maybe there is? Maybe you bought your ticket via a smart contract. You paid extra for flight insurance. Sitting in the back of the Uber you get a notification on your phone that the insurance has already been paid out. You check your bank app and can see the deposit has been made. The money is in your account. No calls to airlines. No briefing lawyers. In fact, no humans anywhere in the process.
Science fiction? Well, perhaps not according to a startup called Chainlink who feel they are on the way to solving a key challenge to turning smart contracts into a reality. For some time we've heard of how blockchain technology and "smart contracts" are going to revolutionise our lives. But before they can do this, they need a reliable way to connect with events in the real world. To date this has proved impossible. This is the so-called "oracle problem," where smart contracts lack reliable access to real-world data.
Smart contracts are computer programs stored in a blockchain. They can be used to automate the unstoppable transfer of crypto-tokens between users, according to agreed-upon conditions. “Oracles” are real-time data feeds that deliver things like weather data, currency exchange rates, airline flight information, and sports statistics to smart contracts.
The idea is that by working together, the two systems can allow blockchain-based services to interact with real-world events with a sufficient degree of trust. So in our canceled flight example, a smart contract might instantaneously pay out on the insurance policy after getting an update from a trusted source of flight times.
Chainlink is combining its software with a trusted hardware system called Town Crier, developed by a leading academic cryptocurrency research group (Cornell University's Initiative for Cryptocurrencies and Contracts). Its software orchestrates decentralised networks of oracles to draw on multiple sources of data for smart-contract-based services so that they don’t have to rely on a single one.
Using cryptography, the Chainlink service provides proof on the blockchain that the data is in fact the information it committed to delivering. Customers can pay for different levels of decentralisation, and the nodes can make money in return for submitting data. Chainlink’s CEO, Sergey Nazarov, says the combination of Chainlink’s software with the Town Crier hardware system is the first “provably secure, decentralised oracle network.”
Chainlink has partnered with several smart-contract projects to demonstrate its oracle network. For example, a project called OpenLaw, which is developing smart-contract-based legal agreements, is using a Chainlink oracle to determine exchange rates between ether and US dollars at a given time. “I don’t know if anyone has fully solved the ‘oracle problem,’” says OpenLaw cofounder Aaron Wright. But he says Chainlink and Town Crier are a “good first attempt.”