18th February 2022 > > DeFi, Oracles and Chainlink – disruptive of the real world.

Market Snap (at time of writing)

Market Wrap

And so it begins. I am unpacking the buying boots, polish in hand, and I will have them at the ready.

Occasional Series – Kamila Valieva …

… falls twice, so there doesn’t need to be an investigation that might possibly prevent Seb Coe – one of my teenage heroes who has since sold his soul – becoming the most powerful man in global athletics.

Whatever happened yesterday, the fact that a drug fuelled teenager represented a country that is “banned” from competitive sports for state sponsored doping on an industrial scale tells us that there is no point in watching any form of the Olympics anymore.

Going forward, I will personally boycott any TV channel showing this contrived charade of sportsmanship.

That will tell ‘em.

Curious Cryptos’ Commentary – Decentralised Finance (DeFi), Oracles and Chainlink

At the heart of all DeFi apps lie smart contracts that behave in an entirely predictable way given specific inputs. The concept of executable smart contracts was created with Ethereum and immediately promised to revolutionise much of today’s commercial world, with insurance, legal and banking as the key targets to disrupt.

There are now more than $200bn of assets (https://defillama.com/) locked in DeFi, compared to less than $50bn a year ago, and less than $1bn just two years ago. The scope for further growth is immense if you subscribe to the theory that the scope for further growth for cryptos is also immense. Which – if you are reading this - I can only assume to be the case.

Much of DeFi today is entirely on-chain, but the real potential for disruption by this nascent technology comes from interaction between the real world and the virtual world.

As an example, to make an insurance claim requires you to fill in forms and provide evidence to start the process. Then follows a long administrative procedure taking up time and money, which can end in a dispute, more delay, more costs, and further legal processes.

A smart contract insurance policy would simply automatically pay out once certain conditions have been fulfilled with no admin, no delay, and crucially, no prospect for any dispute.

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The missing link is the provision of real-world, accurate data into the execution of the smart contract.

This wrinkle is a biggie, and solving it is not easy. But to the rescue comes the concept of oracles.

Oracles must work in a timely fashion and be reliable. Neither of these are easy problems to solve, and I do not suggest for one minute that there are no ongoing issues. But every day that passes, oracles improve, and faith and trust in them grows.

For a long time now, part of my alt portfolio (NOT investment advice) has been invested in Chainlink (LINK) as one of the most promising solutions to the oracle problem. The potential rewards for getting this right are such that future price growth will dwarf any other crypto rewards in my personal view.

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I am not the only one to hold this opinion.

Bank of America have been waxing lyrical on the opportunity afforded by oracles and LINK:

“… ability for hybrid smart contracts, or self-executing and tamper-proof digital agreements, to verifiably and securely access real-world data through oracle nodes like market prices, time of day, weather and GPS location”.

Oracles “enable the next generation of blockchain use cases (to) disrupt major industries”.

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I suspect that any self-respecting crypto portfolio that does not have exposure to oracles in general will underperform those that do.