Originally published by Chainlink (May 17 2019)
Fundamentally, contracts define the obligations between multiple parties in an exchange of value. Thanks to distributed ledger technology, smart contracts promise a better and more automated way to make and execute contracts.
However, the smart contracts today are limited because they don’t know what’s going on in the world. The only way to connect to external resources is through an oracle. Chainlink offers the first decentralized oracle network that gives smart contracts decentralized bidirectional capabilities of receiving external data inputs and sending outputs to other systems.
Chainlink facilitates connectivity through the use of external adapters, which connect oracles to any API endpoint. Connections possible with Chainlink include bank payments, retail payments, backend systems, Web APIs, events data, market data, other blockchains and much more. Chainlink also provides the necessary developer tools to construct any oracle design pattern, such as using multiple data sources, multiple oracles, flexible aggregation methods, payment penalties, and reputation services.
Access to external data opens up a whole new wave of functionality for smart contracts. To inspire you with the limitless potential of connected smart contracts, we put together a list of 44 ways to use Chainlink.
Money and Finance
Money is the most commonly used medium for valuing and exchanging assets. The financial system revolves around maximizing the use of money to grow wealth. Given the high stakes, money and finance are low trust environments where people will go to great lengths to influence markets and avoid obligations. Smart contracts can use decentralized trust to bring determinism to the financial sector, eliminating the burdens of counterparty risk prevalent in probabilistic finance. Financial products can be automated and decentrally verified without the need for trusted intermediaries that have abilities to exert influence and syphon off value.
1. Derivatives – Derivatives are contracts based off the value of an underlying asset. They’re used by companies to de-risk aspects of an investment or deal by hedging against future uncertainties, such as commodity or currency risk. Chainlink empowers automated execution of derivatives contracts by gathering price feeds from one or multiple sources, aggregating them into a single data point, feeding it into the smart contract for execution, and enabling settlement using any payment output. In a market where companies will avoid payments until they establish positions, Chainlink enabled smart contracts are desperately needed for trust and reliability.
2. Bonds – Bonds are an ideal way to raise short term capital by issuing debt to be paid back at a later date. Bond contracts can be replicated as an automated decentralized trustless smart contract. Chainlink can payout bonds in fiat currency, but remove counterparty risk because payments will automatically trigger based on decentrally verified data like LIBOR rates. Chainlink has already demonstrated such capability through a POC with SWIFT where it collected interest rates from five major banks, aggregated them into a single rate used by smart contract, then issued an interest payment in the form of a SWIFT payment message.
3. Market Data – With so many exchanges listing different prices for assets, it’s crucial to aggregate multiple data sources to get an accurate price for an asset. Chainlink offers a variety of developer tools to obtain the most up-to-date and trustworthy prices in an unbiased and decentralized manner. It’s crucial because companies conduct trades worth millions of dollars that execute based off the price of an asset. It’s paramount the price is fair, reliable, and tamperproof to eliminate disputes. Chainlink already has external adapters available for cryptocurrency market data from CoinMarketCap, Brave New Coin, CryptoCompare, and Kaiko.
4. Remittances – Remittances are quite common in the increasingly globalized world. However, it’s a slow and expensive industry, despite advancements in technology. Many DLT projects are aiming to disrupt the remittance industry and Chainlink oracles can provide reliable data on currency conversion rates to smart contracts. They can also enable direct deposit after transfer.
5. Tokenized Assets – Smart contracts have given rise to tokenized assets – representation of real world assets on the blockchain. One of the interesting propositions is creating tokenized assets that can maintain a certain price based off market data fed into the smart contract through Chainlink oracles. Maker DAO already uses 14 oracles to form reference prices for the Maker system. A wide variety of decentralized products can be created using oracles around tokenizing assets like gold, oil, or a weighted basket of assets like the SDR – an international reserve asset offered by the IMF based on a weighted average of five currencies.
6. Decentralized Exchange – Most decentralized exchanges force users to connect their wallet in order to exchange their assets. However, Chainlink offers a new way to design decentralized exchanges by giving the smart contract access to the off-chain accounts for both users. The oracle, specifically one running in a Trusted Execution Environment (TEE), can verify the credentials of both users and determine if they possess the assets they claim to own prior to executing a peer-to-peer trade. Chainlink oracles can relay the information back to the smart contract to determine execution.
It’s easy for smart contracts to issue payments in the cryptocurrency of their native blockchain, such as Ethereum smart contracts issuing payments in ETH. However, many businesses can’t afford the risk of holding volatile cryptocurrency assets on their balance sheet. They also don’t want the additional work of trading out ETH for their preferred fiat currency. Given the wide variety of payment preferences around the world, smart contracts need access to many types of payment options to adequately service global demand.
7. Bank payments – Chainlink enables smart contracts to easily connect to existing banking systems, giving developers the ability to create applications that were not possible in the previous data-siloed financial systems. Smart contract developers can seamlessly integrate information such as consumer bank accounts, direct deposit, and other banking processes from the leading global banks. Developers can also take advantage of international payment messaging standard SWIFT for cross-border payment functionality.
8. Retail payments – Many popular consumer applications such as Uber and AirBnB allow customers to utilize popular retail payments. Chainlink can bring the same ease of use to smart contracts by giving them access to the leading credit card providers and established payment networks, like PayPal and Stripe. Developers can start building applications that take advantage of the most in-demand payment outputs, both domestically and internationally, used on a daily basis in the retail economy. Chainlink already has premade external adapters for PayPal and Mistertango.
9. Cryptocurrency payments – Cryptocurrency is becoming increasingly popular, but most of the popular choices are disconnected from the leading smart contract platforms. Chainlink bridges the gap by allowing any smart contract platform the ability to make payments on any other distributed ledger. This allows smart contracts to trigger payments in Bitcoin, Ripple, Nano, stablecoins, and any other digital asset that’s desired.
The insurance industry operates in a low trust business environment. Policyholders have an incentive to falsely report positive metrics in insurance applications to reduce their monthly deductibles. Insurers raise their rates in order to manage the misrepresented risk profiles of their customer base. Fraudulent claims and payout disputes require intensive labor to verify that the insuree’s claims are accurate and true. Chainlink-enabled smart contracts will provide insurers greater transparency of the customer and shift the industry to a higher-trust-based relationship.
10. Car insurance – Chainlink can connect smart contracts to Smart Car IoT sensor data to streamline car insurance. Theft, wrecks, and other claims can all be automatically triggered, providing assurance to customers that payouts will be received in a timely manner. A customer’s driving habits can also determine insurance rates and trigger discounts. Some noteworthy data available to developers include speed limit obedience, distance traveled, maintenance schedules, braking patterns, point of collision, and road quality.
11. Home insurance – Chainlink enables connectivity to smart home appliances like refrigerators, thermometers, stoves, and alarm sensors. Their IoT data can automatically trigger insurance payouts for claims deriving from fire, theft, or property damage. Weather related insurance, such as earthquake insurance, can also be automatically verified and paid out through sensors, eliminating the burdensome manual verification process.
12. Life Insurance – Smart contracts are ideal for reducing disputes during life insurance claims. Web APIs and external databases host sufficient data for determining death, such as death certificates, obituaries, cremation records, and police reports. Chainlink can use that data to issue out payments and distribute assets amongst several parties listed in the policy.
13. Health Insurance – Thanks to advancements in biotech and IoT wearables (Smartwatch), insurance companies can create smart contracts that offer health insurance discounts or trigger penalties based on a patient’s health data. Some useful data points include distance traveled (exercise), body weight, heart rate, and possibly more advanced biometrics in the future. Smart contracts can also spot data anomalies that trigger mandatory consultations in order keep favorable rates.
14. Flight Insurance – Web APIs like FlightStats and Aviation Edge provide up to the minute information on flight delays and cancellations. Chainlink can update a smart contract on a flight’s status to determine if an insuree is compensated or not. Partial insurance products are also possible for late departures and arrivals. Chainlink already offers a premade external adaptor for the OpenSky API.
15. Large Equipment Insurance and Reinsurance – Many companies require large, expensive machinery to run some of their business operations. Most important machinery is being equipped with IoT devices to gather up to date information on its health. Chainlink can feed that data to smart contracts to issue out payments for failures or schedule automatic repairs. Since large equipment policies usually require reinsurance, Chainlink can split claims or customer payments amongst all the insurance providers.
16. Crop Insurance – Using web APIs, satellite imagery, and agricultural sensors, Chainlink can empower smart contracts to open up a wider range of crop insurance products that protect against external influences.
Analyzing data is critical for developing process efficiencies, making business decisions, and creating real world use cases for smart contracts. Unfortunately, most of the world’s data is processed and stored outside of the blockchain in backend systems, such as data centers. Chainlink facilitates connection to a variety of enterprise systems to enable communication between newer DLT networks and already established backend systems.
17. Cloud – Companies and individuals are increasingly choosing cloud infrastructure as their modern backend database, which hosts computing software and storage solutions. As a result, most high quality off-chain data that a developer needs to trigger their smart contract is held in different cloud providers. Using Chainlink to access the cloud, developers can build smart contract applications that monetize cloud data, send data to the cloud for processing, and, in combination with trusted hardware, access important off-chain information like credentials, sensitive documents, and internal data.
18. Software as a Service (SaaS) – CRM, ERP, and other enterprise SaaS products are the modern version of internal enterprise softwares. They use some of the best machine learning (ML) algorithms for processing and analyzing raw data to improve business processes. Chainlink allows smart contracts to interact with a company’s SaaS-specific data and leverage it into unique trigger mechanisms for smart contracts. Used in tandem with trusted hardware, companies can share confidential insights with the smart contract without it being seen by the other party.
19. Trusted Execution Environment (TEE) – Chainlink allows oracles to run in trusted execution environments – hardware that provides a protected environment for code to run. TEEs allow oracles confidential and tamperproof access to sensitive credentials for signature approval of a smart contract. Chainlink acquired Town Crier – the leading oracle system using TEEs, to expand the use of Chainlink into enterprise applications that require integrity and confidentiality when accessing their data.
20. Databases – Legacy databases still power mission critical business systems and processes in large corporations. The cost to maintain these systems is high, as many of these systems rely on phased-out software and hardware. Chainlink is uniquely suited to connect to legacy databases, SQL, and modern database frameworks, like MongoDB. Chainlink can also be useful as a secure and reliable way for a company to migrate its data to a new, updated DLT platform.
21. Blockchain as a Service (BaaS) – Blockchains and smart contracts can be used to replace backend systems. Chainlink makes it easy for any blockchain, whether it’s private or public, to communicate with any other digital ledger. Already offered on Kaleido, a BaaS marketplace, Chainlink can be easily used by developers to connect their blockchain of choice to any off-chain resource. In the future, there could be chains of smart contracts from different platforms that use Chainlink to trigger one another based on the output of the previous one.
A supply chain starts from sourcing materials and ends with delivering goods to the end customer. Along the route there are many payments, changes in ownership, and documents shared between parties. Smart contracts can revolutionize auditing, as the manual sampling of inventories to verify the integrity of a financial statement is reasonably true, can now be automatically verified for each individual component in the process through things such as RFID chips.
22. Quality Control – IoT sensors can be used to ensure that products are authentic and properly maintained throughout the supply chain. Some examples include keeping food at certain temperatures, sealing containers against tampering, and tracking the locations of goods. Smart contracts can trigger payouts and issue fines depending on IoT confirmation that quality control standards were met as defined in the contract.
23. Trade Financing – Global trade is often financed by banks to cover liquidity and bring trust to value exchange. Trade financing can be upgraded through smart contracts using different data sets, such as the Bill of lading, GPS, RFID tags, or customs data. These common reference points can be used by the smart contract to make full or partial payments, transfer ownership, and issue returns for failure to comply. Chainlink has a custom adaptor already available for the EasyPost API to obtain shipping data.
Water, Energy, and the Internet are the foundation of modern society. Utilities are critical to our life, yet are largely reliant on outdated, time-tested infrastructure and technology to ensure reliability. Smart contracts enable modernization of our critical infrastructure by transitioning and connecting outdated systems to the blockchain.
24. Internet and Telecommunications – Some utilities, particularly the Internet and cable, charge customers based on set pricing structures. However, when their services go down, no one is held accountable. IoT sensors can monitor the uptime of utilities and Chainlink can feed their performance data into a smart contract to calculate monthly payments or issue reimbursements based on downtime.
25. Energy – Similar to uptime, IoT sensors, such as smart meters, can calculate a company’s or user’s consumption rate. Chainlink can feed consumption rates into a smart contract to trigger over-consumption penalties, issue electricity bills, or levy CO2 taxes. People can also sell their energy back to the grid for profit. Smart contracts can take readings from smart meters to monetize someone’s output and facilitate payouts from those consuming energy to those producing it. Solar panels, Tesla Powerwalls, and wind turbines are examples of new energy sources that can be chainlinked to smart contracts.
26. Water – IoT sensors can monitor water tables, track corporate consumption, and identify illegal syphoning of public bodies. Chainlink can feed this data to smart contracts that issue regulatory fines, update supply tracking databases, and trigger law enforcement funding when deployment is needed or cities are at risk of floods.
27. Waste Management – Emissions and waste disposal are industries that could be transformed by IoT enabled smart contracts that can accurately measure output. The data can automatically trigger payments to the proper regulating body or monetize garbage that’s used in recycling or waste-to-fuel technologies.
Gambling is a multi-billion dollar industry that’s ripe with potential for smart contract technology. Casinos have long dominated the gambling industry, but the Internet made the first dent in allowing some startups to carve out market share. Smart contracts enable verifiably deterministic outcomes of betting results and provide true transparency that Internet gambling sites are operating with integrity.
28. Casino Games – Most casino games contain certain odds of winning that are advertised by the casino. However, a customer must trust the casino’s word, since there is no way they can prove those odds are correct. Smart contracts can provide verifiable, tamperproof outcome probabilities through web APIs for odds or by having a Chainlink oracle run the software in a Trusted Execution Environment.
29. Lottery & Randomness – Many applications need randomness to facilitate some type of action, such as lotteries and game shows. Chainlink oracles can provide Dapps with reliable and tamperproof ways to connect with software that simulates pure randomness. Using multiple oracles, multiple randomness sources, or trusted hardware, Dapps can leverage some of the most secure sources of randomness possible. Chainlink already provides an external adaptor for obtain randomness through the Random.org web API.
30. Sports – Smart contracts can verifiably prove the integrity of the execution of a online sports bet through decentralized verification of sporting outcomes using web APIs These smart contracts can be based off the matchup results, individual performances, or even something as silly as the coin toss.
31. Prediction Markets – Prediction markets allow people to trade based on the outcome of events. The events can derive from anything, such as ideas, market events, politics, or even who will get killed next in Game of Thrones. Chainlink enabled smart contracts can provide reward incentives for prediction markets through decentralized consensus of the outcome of the prediction.
It’s no secret that government is a controversial subject that can benefit from some upgraded infrastructure. Smart contracts offer new trust relationships between citizens and officials, as well as more efficient and transparent ways to regulate the market that saves money for both the company and government. However, smart contracts are going to need highly secure, decentralized, tamperproof oracles to remove bias and control from the equation.
32. Regulation – Smart contracts between a regulating body and company can streamline the regulatory process for both sides. Oracles can feed the necessary data into the contract, which the smart contract can process and issue out a certificate of compliance or denial based on the data. Oracles can go a long way in connecting the two systems that otherwise might be very different and unable to communicate. One example might be using sensors to weigh trucks, then issuing certificates of approval if they pass. Another example is scanning transactional activity on the blockchain with an AI algorithm and issuing certificates based on how they comply with regulation.
33. Voting – There are many complaints about voter obstruction, issues with voting machines, and misuse of government funding. Smart contracts can be used to replace voting machines and bring trust and transparency to the process. Since there can be no security holes, decentralized oracles will be necessary to produce authentic results. Voting can even be taken a step further through direct democracy, whereas government funding and referendums are smart contracts triggered directly off voting results.
34. Citizenship – Decentralized identity is a concept that’s becoming possible through DLT applications. Instead of companies or governments holding someone’s identity in a central repository, a person’s identity could be stored on a distributed ledger. Chainlink enabled smart contracts could use these databases to verify credentials like name and citizenship, without leaking any personal information. In the future, they could be called on by smart contracts for voting identification, KYC/AML verification, and customs approval.
Authorization and Identity
Although smart contracts take away the need for trust, there are still many times when a smart contract will want to be triggered by some trusted source. Usually such a source would come from an authority figure or be used for identity authentication. It’s important that smart contracts enable access to trusted sources since they will be necessary in many instances before execution.
35. E-signatures – E-signatures have become a popular way to obtain digital signatures. It has modernized the signature process and helped companies avoid the costly overhead of obtaining a physical signature. Signatures are the most common way to authorize contracts, therefore it’s a necessity that Chainlink oracles give smart contracts access to leading e-signature companies like DocuSign.
36. Biometrics – Another verifiable way to authorize a smart contract is through biometric data, such as a fingerprint or eye scan. Since biometrics are uniquely identifiable to a specific person, they can be an effective way to verify someone’s identity as long as there is a reliable database or source to cross reference it against. Chainlink oracles can both deliver the biometric data to the smart contract and connect it to different databases to verify authenticity.
37. Statistics – Data derived from trusted sources using Web APIs or external databases can be used to verify the outcome of many contracts. For example, a film project could use a smart contract to pay employees a performance bonus based on the box office revenue, as gathered by Chainlink oracles from several reliable websites. Another example, already demonstrated in a recent Hackathon by EventLINK, is scanning Twitter for “hype” to determine the location of popular events.
38. Credentials – Chainlink oracles, in combination with trusted hardware, can be used to securely handle private account information of external systems and applications. The power of this is that the Chainlink oracle can verify credentials, like if someone has the proper amount of funds or possesses a specific item. Once the oracle relays confirmation, the smart contract can trigger. Credentials can be especially effective for verifying inputs before exchanging valuable assets.
39. Account Security: Many users want a second layer of security for their smart contract in case something goes wrong. Chainlink offers decentralized access to various second layer security solutions, such as using Hydrogen for two-factor authentication and account recovery solutions through the Rtrade external adaptor. Account security is important nor emerging technologies and Chainlink gives smart contracts access to the latest offerings as they come on the market.
40. Intellectual Property – All types of intellectual property, from royalties like copyrights and trademarks to license fees for patents, can be made into smart contracts. Chainlink can be used to check IP databases for ownership verification and transfer payments from the user to the IP owner. Smart contracts could even tokenize partial ownership of IP and divvy out payments according to a person’s share percentage.
41. Contribution Bounties – Open-source projects are often successful because they have many people working on the same project. It’d be advantageous if there were reliable ways to reward those making contributions to the project utilizing smart contracts. One such way would be having a trusted party, such as the Lead Engineer, offer bounties for contributions. When the contributions are accepted, such as Github commits, the smart contract can use a Chainlink oracle to verify the commit was accepted and trigger a bounty payment.
42. Data Monetization – Since Chainlink is designed to connect smart contracts to inputs and outputs, it offers new markets for companies to sell their data and services. There is little downside since companies don’t have to change their backend system, but instead just sell their already established business resources. Companies are always looking for new revenue streams, and being a resource provider for smart contracts could become a lucrative business model heading into the future.
43. Satellite Imagery and AI – It would be interesting if satellite imagery in combination with IoT could gather data on external activities like a construction project. AI could then analyze the data and cross reference it with past projects to determine the completion percentage of a project. An oracle could relay that data to a smart contract to issue payouts to construction companies. It would solve a major problem in delayed cash flows for companies performing large, time consuming projects.
44. Time – Many contracts must trigger at specific time intervals, such as contracts that expire at an exact time on a specific date. Time can be used to trigger execution or trigger another oracle to fetch a different data set. We already provide the Chainlink Alarm Clock external adaptor for developers needing timestamped based triggers for their smart contract.