Ethereum 2.0 is just around the corner, with a rumored release on Ethereum's 5th Anniversary on July 30th 2020.
Cryptocurrency investors should keep an eye on Ethereum and the interoperability platform Chainlink, these two technologies are set to significantly impact blockchain technology.
This post will explain why.
Quick Summary of Ethereum
Ethereum (ETH) is a decentralized network, founded by Vitalik Buterin in 2013.
Ethereum took the democratic ideals of Bitcoin and added a programmable layer so developers could build applications on the blockchain.
The Ethereum Network is powered by its cryptocurrency ETH which is used to pay for transactions and power DApps and Smart Contracts.
ETH is also used to reward network validators who secure the Ethereum Network through "mining". Later this year "staking" will the be the method of securing the Ethereum network.
There are 3 main technological features of Ethereum:
Development of Decentralized Applications (DApps) - Developers can create applications which run on a network of multiple computers instead of a single, centralized server.
Deployment of Smart Contracts - Developers can deploy smart contracts or agreements that automatically execute once certain conditions have been met.
Ethereum Virtual Machine (EVM) - An emulation of a computer system that runs DApps and Smart Contracts on the Ethereum Network. Every full node in the Ethereum network runs a copy of the EVM.
In simple terms, this a powerful computer that can only be accessed via computers connected to the Ethereum network.
Ethereum 2.0 will bring the following features to Ethereum:
Beacon Chains - A system chain which maintains a registry of validators, process cross-links to the mainchain and the finality gadget.
Validators will be able to stake their ETH once Proof-of-Stake is implemented, allowing them to validate transactions, vote on the next block and receive a passive income in return for securing the network.
Sharding - The Ethereum network will be split into "shards", each one functioning independently, processing transactions off the mainchain. This will improve Ethereums transaction capacity and speed.
Ethereum flavoured WebAssembly (eWasm) - A WebAssembly based Ethereum Virtual Machine (EVM). This will enable faster code execution, replacing the current EVM and improving scalability.
Proof-of-Stake (PoS) - Instead of contributing computing power, users secure the network by "staking" their ETH holdings to validate transactions or "mine" blocks.
The more ETH a user stakes, the higher their voting power. In return for staking their ETH, validators will earn back 4-10% on their staked Ethereum as a reward for securing the network.
To take part in the Proof-of-Stake (PoS) protocol you need to become a validator by depositing 32 ETH ($3,712 by current prices) into an ETH 1.0 smart contract.
Together these features will enable Ethereum to create a new, democratic and decentralized internet, Web 3.0.
Quick Summary on Chainlink
Chainlink is a distributed oracle network that connects smart contracts on the blockchain to external resources including real-world data, web API's, real-word events and payment networks.
Chainlink revolves around it's LINK network, a decentralized oracle network to connect smart contracts with off-chain data, events and payments.
The LINK network is powered by it's cryptocurrency "LINK", which is used to reward contributors who participate in the LINK ecosystem.
In simple terms, Chainlink makes it possible for the following data to interact with a blockchain smart contract:
- Retail payments - VISA, Mastercard, PayPal payments can cause an Ethereum smart contract to execute.
- Data from other blockchains - Transaction data from Bitcoin blockchain to interact with Ethereum smart contract for example).
- Bank payments - Bank transfers for example can cause a smart contract to execute upon being sent from your bank account.
- Events & IoT - In food supply chain management for example, a drop in temperature could cause a smart contract to execute. This smart contract could then communicate with another process that raises the temperature, or if too much time has passed, dispose of the contaminated food.
- Web API's - Web applications like online banking platforms, shopping carts and email services can interact with smart contracts.
- Backend systems - Data from content management systems and cloud-based software can interact with smart contracts, enabling more tech companies to integrate blockchain into their technology stack.
- Market data - Data from stock exchanges and financial systems can interact with blockchain based smart contracts.
As you can see Oracles will play an important role in the evolution of blockchain technology.
Chainlink's main technological features:
Oracles - These are third-party information sources which supply data to blockchains that support smart contracts.
Since blockchains cannot access data outside of it's native network, oracles are needed as a courier to transport this data between the data source and the smart contract inside the receiving blockchain.
LINK Network - Chainlinks oracle network, where anyone can securely provide external data to blockchain smart contracts.
If you have a data feed, a payments platform, a tracking service or any other useful API, you can provide these directly to smart contracts in exchange for LINK cryptocurrency.
Together, these features will enable to Chainlink to create a reliable, self-sufficient and tamper-proof global ecosystem through the marriage of blockchain technology and real world data.
Hopefully the above information has given you simplified information and/or refreshed your memory on how Ethereum and Chainlink work.
Now onto how Ethereum and Chainlink will change blockchain technology, first lets start with Ethereum.
Ethereum - Easier blockchain addresses and a censorship free internet
Your typical wallet address is a long, random string of alphanumeric characters, for example a typical Ethereum wallet public address looks like this: 0xBB9bc244D798123fDe783fCc1C72d3Bb8C189413
To transfer ETH to another address you need to carefully copy and the paste it to ensure the ETH get's to it's intended destination.
However, wallet addresses don't have to be complicated. You could compare wallet addresses to IP addresses and domain names, all three of these technologies are used to:
- Enable the transfer of data (cryptocurrency for wallets, requests for IP addresses and domains)
- Identify the receiver and sender of data (wallets show the receiving and sending addresses, IP addresses mark activity and domain names identify the IP address)
As you can see, these technologies are very similar. People will need simple wallet addresses, the same way we need domain names for IP addresses.
To understand this relation more, lets look again at IP Addresses and why they sometimes use domain names.
”To understand domain names, you need to understand what a website is and how the internet works.
A website is essentially just files stored on a web server. The web server “hosts” your website, making it visible on the internet while the domain name is the address to those files which make up the website.
The internet is a network of computers which are all connected together. To distinguish one computer from another, each computer is identified using a unique string of numbers called an “IP Address” (Internet Protocol address).
Google Support describes an IP address as working the way a return address would on a piece of mail. Essentially, an IP address is a unique identifier for networks of computers connected to the internet.
All of the online activity from a computer is signed with it’s IP address. This could be a number like 172.16.254.1 or 2001:db8:0:1234:0:567:8:1.
As you can see those numbers would be difficult to remember and this is where domain names come in.” - HomeGrown Income
As you can see, typing "2001:db8:0:1234:0:567:8:1" into your browser or having to remember "172.16.254.1" when accessing a website is very inconvenient for people.
That's why we have domain names, so you can type in "Hackernoon.com" instead of "35.224.188.159" every time you want to read your favorite tech stories.
Reference: https://ipinfo.info/html/ip_checker.php
Wallets are not just used by people for exchanging money, they are also used for smart contracts. If smart contracts use domain names instead of alphanumeric addresses, this will make it easier for people to deploy their own smart contracts.
Wallets are not just used by people for exchanging money, they are also used for smart contracts. If smart contracts use domain names instead of alphanumeric addresses, this will make it easier for people to deploy their own smart contracts.
Unstoppable Domains is an Ethereum DApp that tackles this problem. They sell blockchain domain names, allowing users to own simple wallet addresses and build websites protected from censorship.
Working with the Ethereum Foundation and the Zilliqa Foundation they let users buy .crypto or .zil domains. Users can then add multiple cryptocurrency addresses to their domain.
For example you could buy the domain "mywallet.crypto" or "mywallet.zil". Next you add your Bitcoin, Ethereum, Litecoin or Zilliqa wallet addresses to your domain ("mywallet.crypto").
Now whenever someone wants to transfer some cryptocurrency to you, they simple go to their wallet, type "mywallet.crypto" in the address bar and press send. The cryptocurrency then gets sent to it's corresponding wallet.
The domains you purchase are also stored in your wallet and are not managed by ICANN who maintain the records of all regular domain names.
Combine this with decentralized storage networks like IPFS for web hosting and you can create a website that cannot be taken down or changed by anyone but yourself. Essentially a website protected from censorship.
This ties in with Ethereums common nickname as "The World Computer", imagine an internet where you own a domain that can receive money, receive messages and function as a web address.
The funny thing is, a democratic internet is only a small portion of what Ethereum could lead to, smart contracts will birth better and more intelligent applications.
Combine smart contracts with Oracles and we can see more powerful social media platforms, improved banking and financial security.
With that said, lets have a look at Chainlink.
Chainlink - Seamless blockchain integration, IoT application, better security and stronger applications
Smart Contracts naturally limited since they don't know whats going outside of their native blockchains.
Oracles will open up a whole new world of functionality for smart contracts and the companies or developers that deploy them.
Currently there are over 44 ways that Chainlink oracles can be used with smart contracts and these use cases are spread across multiple industries.
Below we'll look at a few ways these industries could be impacted by Chainlinks technology:
Supply Chain
Oracles can be used for quality control in the supply chain, to ensure that products are authentic and properly maintained. IoT sensors can be used to detect if a food was kept at the correct temperature.
An oracle will transmit this data to a smart contract that can trigger the following actions:
- Issue a payout upon delivery of goods which have met quality control standards.
- Issue a fine if the products haven't met quality control standards.
- Depending on the devices used to control temperature, the smart contract can communicate with the device to either increase or decrease the temperature.
- Send a warning to staff, notifying them that product quality could be compromised due to incorrect temperature levels.
Chainlink oracles can also be used for tracking products during it manufacture, from individual components to the finished product.
This can verify how a finished good was produced, whether it used illegal materials or if it used Fairtrade ingredients for example.
Utilities
The energy industry is an interesting use for Chainlink oracles. IoT sensors such as a smart meter can calculate a user or company's energy consumption rate.
Chainlink can send these rates to a smart contract used for issuing energy bills. If a company or user has renewable energy devices installed on their premises they can also sell unused energy back to the grid for a profit.
Solar panels, wind turbines and Tesla Powerwalls can all be chainlinked to smart contracts to transmit energy production data.
Through oracles, smart contracts can be linked with smart meters to monetize a users energy output, collecting payments from users consuming the energy and sending payouts to those producing it.
Government
Regulation is another area where oracles can be used effectively. Smart contracts can be setup between a regulating body and a company.
Next, chainlink oracles can send the necessary data to the smart contract. The smart contract then processes the data and issues out a certificate of compliance or denial based on the data received.
This can tie in with IoT devices, for example in the UK, Heavy Goods Vehicles (HGV's) have a maximum weight depending on the vehicle type and number of axles.
An IoT sensor can be used to weight the vehicles, an oracle will then send the data to a smart contract which will issue a certificate of approval if the vehicles passes the weight regulations.
Authorization & Identity
Chainlink oracles can deliver biometric data such as fingerprints, eye scans and face scans to a smart contract.
This will greatly assist in creating a trustless identity verification system, as long as there is a reliable database to cross reference it against.
The Chainlink oracle will deliver the biometric data to the smart contract and connect it to external databases for cross referencing.
This will enable people to verify their identity without giving out their personal information (such as passports) to a third party every time.
With less companies storing your personal information, the less chances there are for it to be stolen in a hack or data breach.
Misc. Industries
The Internet-of-Things (IoT) along with satellite imaging can be used to gather data on a construction project for example. Artificial Intelligence (AI) can analyze the data, cross referencing it with past projects to calculate the time it would take to complete a project.
A Chainlink oracle can then pass this data onto a blockchain based smart contract which is used to issue payouts to construction companies. Once the estimated completion time has passed, the smart contract will release the payment.
This can be especially useful for large projects with project milestones, a smart contract can release payments every month or so, depending on the estimated time to complete each task.
Industries were referenced from the following source: https://blog.chain.link/44-ways-to-enhance-your-smart-contract-with-chainlink/
Chainlink oracles will work very well in particular with IoT devices to monitor, collect and transmit data to blockchain based smart contracts.
Chainlink oracles will work very well in particular with IoT devices to monitor, collect and transmit data to blockchain based smart contracts.
Final thoughts
Despite blockchain technology being just over 10 years old, we are still in the very early stages of it's maturity. The technology is constantly being refined and added to other the years.
Ethereum is less than 5 years old and Chainlink is less than 3 years old, however it's parent company SmartContract was started back in 2014.
Despite still being young, these technologies are pushing forward with very ambitious plans for the future.
Ethereums virtual super-computer and Chainlinks oracles will make up a huge part of blockchains technology's foundation.
The Ethereum Network will house next-gen applications, decentralized websites and smart contracts, creating a new, stronger and democratic web ecosystem.
Chainlink Oracles will act as the messengers, moving between the Blockchain and the Real World, like Hermes in his winged sandals as he moved between Mount Olympus and the Human World in Greek Mythology.
The Future Is Coming. Companies who don't act now will be left behind, just like the companies who failed to adopt telecommunications and the internet.
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