by Matt Lundy
One of the challenges today with public and private blockchains is connecting legacy data to them. In fact, for many enterprises that are in the process of developing blockchain applications, it can be viewed as a showstopper.
ChainLink is an API-based connectivity layer that is offered by San Francisco-based SmartContract. This blog discusses the potential for ChainLink and connecting legacy applications to new blockchain-based applications.
Smart Contracts: The Promise of Blockchain
Today, contracts must be enforced manually, but blockchain offers a new, more efficient path in smart contracts. Smart contracts are a way to develop an automatically enforceable contract, which activates once specified conditions have been met.
For example, in an ecommerce scenario, a payment is automatically issued once a product is received. Rather than being subject to the interpretations and abilities of human enforcement, smart contracts rely on software-based notifications. This allows them to automate the entire execution of the contract. Once all terms and conditions have been agreed upon and explicitly defined (as they must be for a machine to understand them), the involved parties don’t need to worry about any aspect of the contract process; the terms of the contract will be automatically executed once the conditions have been met.
The practical application of smart contracts is a burgeoning horizon. They are already being used for invoicing and can eliminate disputes on a specific invoice because all parties get notified at the same time. In real estate, blockchain applications have the possibility of eliminating the need for escrow services. One of the major advantages of smart contracts is to severely reduce or outright remove the need for many of today’s middlemen.
In a similar vein, smart contracts will have a huge impact on software license agreements (SLAs) and SLA enforcement. The entire process of an SLA will be made more transparent due to all parties being able to see all information as a result of the blockchain technology. The execution of an SLA will become increasingly more automated as the human execution is replaced by machines and software.
Another benefit of smart contracts is that they are kept secure by the decentralization of blockchain technology, preventing any tampering of previous data. This is a result of one of the core concepts of blockchain: that each one has a certain frequency in which a new block is added. Every time a new block is added, every machine on the blockchain validates and updates the new data associated with the new block. This means that for any security threat to change any information on an old block, it needs processing power equivalent to every machine on the chain to override the system and change the data.
The ChainLink API Connecting Smart Contracts with Legacy Data
A current major problem with smart contracts is that they are confined to the limited information on a chain. As mentioned above, SmartContract seeks to solve this issue with its new ChainLink API, which connects smart contracts to off-chain applications via web APIs and data streams. Data connectivity is one of the vital steps when it comes to the viability of blockchain-based smart contracts. Without any ability to connect with information outside of the chain, smart contracts will take longer to become a feasible alternative to existing contract practices and technologies.
ChainLink Will Be the First of Many API Connectors for Blockchain
While ChainLink is new, it isn’t a new idea to have APIs that connect applications together. Aragon expects that there will be many other smart contract blockchain providers that will compete with SmartContract for these types of API-based products and services. The winner of this competition will depend on who can provide the best functionality in integrating smart contracts and legacy data. As of now, the potential that rests latent in smart contract technology (and blockchain as a whole) isn’t being fully utilized.
Aragon talks about blockchain and digital transaction management (DTM) as part of our ongoing research agenda. See the links below for some of our recent research on blockchain and keep checking back for our new strategic report coming soon on blockchain and smart contracts.
Related Research Notes:
Blockchain & DTM: Evaluating Identity, Signatures, and Smart Contracts