Chainlink 2.0: Next Steps in the Evolution of ...

1 Chainlink : Next Steps in the Evolution ofDecentralized oracle NetworksLorenz Breidenbach1 Christian Cachin2 Benedict Chan1 Alex Coventry1 Steve Ellis1 Ari Juels3 Farinaz Koushanfar4 Andrew Miller5 Brendan Magauran1 Daniel Moroz6 Sergey Nazarov1 Alexandru Topliceanu1 Florian Tram`er7 Fan Zhang815 April Labs2 The author is a faculty member at University of Bern. He co-authored this work in his separatecapacity as an advisor to Chainlink author is a faculty member at Cornell Tech. He co-authored this work in his separate capacityas Chief Scientist at Chainlink author is a faculty member at University of California, San Diego.

2 She co-authored this workin her separate capacity as an advisor to Chainlink author is a faculty member at University of Illinois Urbana-Champaign. He co-authored thiswork in his separate capacity as an advisor on author is a PhD candidate at Harvard University. He co-authored this work while on leavefrom Harvard, in his capacity as a researcher at Chainlink author is a PhD candidate at Stanford University. He co-authored this work in his separatecapacity as an advisor to Chainlink author will be joining the faculty of Duke University in fall 2021. He co-authored this workin his current capacity as a researcher at Chainlink this whitepaper, we articulate a vision for the Evolution of Chainlink be-yond its initial conception in the original Chainlink whitepaper.

3 We foreseean increasingly expansive role for oracle networks, one in which they comple-ment and enhance existing and new blockchains by providing fast, reliable, andconfidentiality-preserving universal connectivity and off-chain computation forsmart foundation of our plan is what we callDecentralized oracle Networks, orDONs for short. A DON is a network maintained by a committee of Chainlinknodes. It supports any of an unlimited range of oracle functions chosen fordeployment by the committee. A DON thus acts as a powerful abstraction layer,offering interfaces for smart contracts to extensive off-chain resources and highlyefficient yet decentralized off-chain computing resources within the DON DONs as a springboard, Chainlink plans to focus on advances in sevenkey areas: Hybrid smart contracts:Offering a powerful, general framework for aug-menting existing smart contract capabilities by securely composing on-chainand off-chain computing resources into what we callhybrid smart contracts.

4 Abstracting away complexity:Presenting developers and users with simplefunctionality eliminates the need for familiarity with complex underlyingprotocols and system boundaries. Scaling:Ensuring that oracle services achieve the latencies and throughputsdemanded by high-performance decentralized systems. Confidentiality:Enabling next-generation systems that combine blockchains innate transparency with strong new confidentiality protections for sensitivedata. Order-fairness for transactions:Supporting transaction sequencing in waysthat are fair for end users and prevent front-running and other attacks bybots and exploitative miners.

5 Trust-minimization:Creating a highly trustworthy layer of support forsmart contracts and other oracle -dependent systems by means of decen-tralization, strong anchoring in high-security blockchains, cryptographictechniques, and cryptoeconomic guarantees. Incentive-based (cryptoeconomic) security:Rigorously designing and ro-bustly deploying mechanisms that ensure nodes in DONs have strong eco-nomic incentives to behave reliably and correctly, even in the face of well-resourced present preliminary and ongoing innovations by the Chainlink communityin each of these areas, providing a picture of the broadening and increasinglypowerful capabilities planned for the Chainlink Decentralized oracle Networks.

6 Seven Key Design Goals .. Organization of this Paper ..192 Security Model and Current Architectural Model .. Consensus Assumptions .. Notation .. Note on Trust Models ..223 Decentralized oracle Network Interface and Networking .. Computation .. Storage .. Transaction-Execution Framework (TEF) .. Mempool Services .. Stepping Stones: Existing Chainlink Capabilities .. Reporting (OCR) .. and Town Crier .. On-Chain Chainlink Services .. Reputation / Performance History ..334 Decentralized Services Enabled by Decentralized oracle Proof of Reserves.

7 Interfacing with Enterprise / Legacy Systems .. Decentralized Identity .. Priority Channels .. Confidentiality-Preserving DeFi / Mixicles ..415 Fair Sequencing The Front-Running Problem .. Front-Running .. User Transactions .. FSS Details .. Processing .. Atomicity .. Fair Transaction Sequencing .. Network-Layer Considerations .. Entity-Level Fairness Policies ..5736 The DON Transaction-Execution Framework(DON-TEF) TEF Overview .. Transaction Routing .. Syncing .. Reorgs.

8 647 Trust Data-Source Authentication .. Limitations of Authenticated Data Origination .. Source Data .. Source Data .. DON Trust Minimization .. Clients .. Reports .. Guard Rails .. Trust-Minimized Governance .. Public-Key Infrastructure ..738 DON Deployment Rollout Approach .. Dynamic DON Membership .. DON Accountability ..779 Economics and Staking Overview .. Background .. Modeling Assumptions .. Incentive Model: Rational Actors .. Adjudication Model: Correctness by Assumption.

9 Model .. Much Cryptoeconomic Security Is Enough? .. Staking Mechanism: Sketch .. Mechanism Details .. Staking Impact .. of Second Tier .. Insurance .. Single-Round Variant .. Implicit-Incentive Framework (IIF) .. Fee Opportunity .. FFO .. Reputation .. IIF Analytics .. Putting It All Together: Node Operator Incentives .. The Virtuous Cycle of Economic Security .. Additional Factors Driving Network Growth .. 10110 Conclusion102A Glossary116B DON Interface: Further Networking .. Integrity.

10 Confidentiality .. Availability .. Computation .. Trusted Execution Environments (TEEs) .. TEE Security .. Secure Multi-Party Computation (MPC) .. Storage .. Resource Pricing .. 125C Adapter oracle -Mediated Data-Source Access (MediatedReport) .. Cross-Ledger Reports (XL-Report-Read) .. Confidential Switch (ConfSwitch) .. 128D Functional Functional Signatures for Combining Data .. Discretized Functional Signatures .. 130E Prospective Bribery134F Random vs. Committee-Based oracle Selection13551 IntroductionBlockchainoraclesare often viewed today as decentralized services with one objective:to forward data from off-chain resources onto blockchains.