Thread by @ChainLinkGod

1/ #Chainlink is widely known for its ability for deliver real world data onto blockchains (e.g. price feeds)

However, its capabilities extend far beyond that to performing trust-minimized oracle computation

This opens up so many possibilities 👇
blog.chain.link/what-is-oracle…

2/ Oracle computation is the process of using decentralized oracle networks (DONs) to perform off-chain computation on the behalf of smart contracts, while being anchored to a blockchain to generate trust-minimization

3/ Just like how data delivery extends the capabilities of smart contracts through added connectivity, oracle computation extends smart contracts with scalability, cost-efficiency, privacy, and additional features that cannot be realistically achieved on a blockchain itself

4/ Blockchains are an extremely powerful tool, leveraging on-chain computation to provide a final settlement layer for updating the state of smart contracts (e.g. transfering tokens)

The key attribute is that they are highly tamper-resistant and therefore trustworthy

5/ However, this is not without limitations

In order to achieve a strong consensus, blockchains limit their capabilities to strictly what is needed to validate transactions

Blockspace is also commonly restricted to ensure decentralization

6/ This means highly decentralized networks are tamper-resistant but often have higher transaction costs and lower speeds

High speed chains have a higher throughput, but are still limited in features like privacy, automation, randomness, and interoperability

7/ Instead of blockchains performing every possible computation for dApps, much of the computation can be moved off-chain with the results relayed on-chain

This is the model of using blockchains as a final settlement (what they're good at), while sidestepping their limitations

8/ Traditional centralized Web 2.0 platforms provide the feature richness needed by blockchains

However, they do not provide the trust minimization guarantees that users have come to expect from dApps

9/ Without end-to-end decentralization, transparency, and tamper-resistance for the computation powering dApps, there's little reason to use a blockchain in the first place

Therefore, what is needed is a middle ground solution, something in-between Web 2.0 and blockchains

10/ This is where oracle computation comes into play

As defined before, oracle computation is trust-minimized off-chain computation performed on decentralized oracle networks (DONs) that are anchored to a blockchain

11/ DONs can perform any off-chain computation in a scalable and feature rich manner that's on par with Web 2.0 services

All while being more decentralized and trust-minimized by leveraging blockchain techniques and dependencies for correctness, uptime, and transparency

12/ The trust-minimization of oracle computation is not only a result of decentralization and on-chain service agreements

DONs can also be made to prove their computations to a blockchain using multi-party computation, cryptographic proofs, fraud proofs, re-execution, and more

13/ Trust minimization is a necessary property but the key advantage here compared to doing everything on-chain is that oracle computation is far more flexible

Blockchain computation is highly standardized, while oracle computation can be encompass any design pattern

14/
-Any number of oracle nodes
-Any selection of nodes
-Custimized execution schedules
-Any level of cryptoeconomic security
-Any verification techniques
-Any defense in depth techniques
-Any level of privacy
-Any level of permissioning
-Any external dependencies
-Much more

15/ Users can optimize for their preferred level of security and performance based on their budget, trust assumptions, and general needs

Oracle computation is not a theoretical concept but already being done in the #Chainlink network today to enable exisiting and future services

16/ Chainlink Keepers 🤖

A transaction automation solution that triggers blockchain computation to run when predefined conditions have been met

Oracle computation checks for conditions by executing smart contract code off-chain, with the results fully verified on-chain

17/ Keepers cannot be malicious because they are triggering prewritten on-chain functions that verify if it's time to perform the desired action

This can be considered on-chain re-execution, with the key advantage here being the triggering of functions is automated

18/ Chainlink Verifiable Random Function (VRF) 🎲

VRF is secure random number generator that produces a random value & a cryptographic proof that is verified on-chain before being consumed by a dApp

The RNG produced cannot be manipulated without breaking the cryptographic proof

19/ Oracle computation is used to generate the cryptographic proof based on block data and a node's private key

This means it's not fetching from an external source, but actually generating the randomness itself

20/ Chainlink Off-Chain Reporting (OCR) 📦

OCR is a protocol enabling the off-chain aggregation of data so only a single transaction (containing each oracle's observation and signature) is submitted on-chain for each report

This is oracle computation enhancing data delivery

21/ Chainlink External Adapters (EAs) 🔌

EAs are modular packages that extend the capability of Chainlink nodes enabling them to access paid APIs and perform any off-chain computation like statistical analysis, price index creation, or machine learning processes

22/ Cross-Chain Interoperability Protocol (CCIP) 🌐

CCIP is an open source standard to enable interoperability between blockchain networks, including the transfer of assets and commands, enabling secure token bridges and cross-chain applications

23/ Chainlink Fair Sequencing Services (FSS) ⚖️

FSS is a decentralized transaction ordering solution that can receive user-encrypted transactions, order them by a predfined policy like first-in first-out, and then decrypt transactions

This helps mitigate harmful forms of MEV

24/ Chainlink DECO 🔒

DECO is a zero knowledge proof-based oracle protocol that enables users to prove facts about their TLS web sessions to oracle nodes in a privacy preserving manner

This enables the use of private data in smart contracts without revealing the data

25/ Layer 2 validation ✅

Chainlink nodes can bootstrap the validator set of layer 2 rollups (optimisic, zero-knowledge, valdium, volition), thereby directly executing smart contracts off-chain and submitting and verifying the results on-chain with fraud proofs and ZKPs

26/ Ultimately, oracle computation significantly enhances the capability of blockchain networks and the smart contracts that run on top of them, while retaining the level of trust minimization required by decentralized applications

We've only seen the tip of the iceberg

27/ Hybrid smart contracts can leverage both off-chain data and oracle computation to enable more advanced applications

Therefore, the definition of oracles should be expanded to capture both their data delivery and trust-minimized computation capabilities