Binance Smart Chain Successfully Integrated Chainlink’s Oracle Solution for Building DeFi
As Binance Smart Chain nears its mainnet launch, it has started collaborating with Chainlink, and this is good news for developers and the overall blockchain industry.
Specifically, Binance Smart Chain’s testnet blockchain has integrated Chainlink oracles, which will bring real-world data on events happening outside the Binance ecosystem into Binance Smart Chain in a secure manner. This empowers developers using Binance Smart Chain to build smart contract applications that connect to reliable real-world data feeds from Chainlink.
What happens after that? Developers can come up with new use cases in derivatives, crypto payments, automated asset management, and more.
To recap, Binance Smart Chain is a sovereign smart contract blockchain delivering programmability that’s compatible with the Ethereum Virtual Machine (EVM). Designed to run in parallel with Binance Chain, Binance Smart Chain retains the former’s fast execution times and low transaction fees while adding Smart Contracts functionality to support compatible dApps.
What does Chainlink offer to developers using Binance Smart Chain? Chainlink grants immediate access to a huge collection of secure node operators, premium data sources, and proven oracle solutions for getting off-chain data and verifiable randomness. By integrating Chainlink oracles, Binance Smart Chain allows developers to build secure and reliable smart contract infrastructure.
Connecting Real-World Data to Binance Smart Chain
Smart contracts are valuable because they can trigger automated transactions based on real-world events, such as a change in asset price or the delivery of goods. However, the blockchains powering smart contracts, like Binance Smart Chain, are self-contained environments that only process transactions using data already stored on the blockchain (on-chain). While this makes blockchains highly secure and reliable, the inability to interface with the off-blockchain world limits the functionality of smart contracts.
An oracle is a piece of middleware that connects blockchains to resources existing outside the blockchain (off-chain). The oracle retrieves off-chain data and broadcasts it on-chain so the smart contract can read it. The oracle can also push data directly into the smart contract to trigger execution or push data out of the smart contract to trigger a command on an external system.
Oracles offer advanced functionality, but they also introduce new attack surface areas that need to be secured. This is where Chainlink offers a solution: a network of decentralized oracles that ensures that the oracle mechanism is as secure as the underlying blockchain.
Developers can use Chainlink to aggregate data from multiple oracles (nodes) and multiple data sources to create a manipulation-resistant data point that is securely and reliably delivered to the smart contract. This brings end-to-end security to decentralized applications using external data.
Chainlink features the following benefits:
- Proven solutions used in production by many leading smart contract development teams, particularly its Price Reference Data for DeFi and Verifiable Random Function (VRF) for fraud-proof random number generation.
- Hundreds of independent node operators available, with an increasing number of security-reviewed nodes for greater performance assurances.
- Access to high-quality data sources via their external adapters, which allow nodes to source data from premium credentialed APIs that are password protected.
- A strong development team producing original academic research-based oracle solutions, along with a large open-source community building on the network.
Giving the developers immediate access to time-tested oracle solutions will expedite the development of decentralized applications on Binance Smart Chain. This removes the risks and time delays associated with deploying new oracles and ultimately allows the ecosystem to focus on building products instead of provisioning infrastructure.
Building Advanced Applications on Binance Smart Chain with Chainlink Oracles
Binance Smart Chain can leverage the liquidity on Binance DEX in a variety of new and exciting ways via Chainlink oracles and benefit end-users.
The programmatic functionality of Binance Smart Chain enables developers to build DeFi applications in lending/borrowing and derivatives. These DeFi applications can source market prices, tap into liquidity, or make settlements based on data from Binance DEX.
Most DeFi applications need to reference reliable price feeds to trigger key contract functions, such as liquidating collateral, issuing a loan, and settling a derivatives contract. Chainlink oracles bring greater market coverage to DeFi applications on Binance Smart Chain by retrieving price data from data aggregators, which aggregate prices from all centralized and decentralized exchanges. These can be combined with Chainlink oracles that source prices directly from Binance DEX and Binance exchange, which contain the most volume for BEP2 tokens and most other popular cryptocurrencies. This brings more robust security and reliability to the price feeds, giving users more confidence in financial products built on Binance Smart Chain.
- Crypto Payments
Binance DEX offers several payment options for settling smart contracts, including BNB, the native token of the Binance Chain, as well as Binance-backed, USD-denominated stablecoin BUSD and other BEP2 tokens. Through its smart contract functionality, Binance Smart Chain can turn any of these payment options into a form of on-chain settlement.
For example, Binance Chain projects can automate payments in their native BEP2 tokens using Binance Smart Chain. The smart contract can source exchange rates from Chainlink price oracles that allow users to swap their cryptocurrency to any BEP2 token needed to pay the specific service.
Another example is reconstructing global trade contracts as smart contracts on Binance Smart Chain. Once Chainlink oracles attest to the completion of certain conditions, the smart contract automates the payment for goods in the form of BNB and/or BUSD on Binance Smart Chain.
- Asset Management
Binance Smart Chain can host smart contracts that automate trades and portfolio management strategies based on market events. Asset management strategies can be tied to the movement of markets, such as price action and trading indicators on Binance Chain, or based on external events like traditional market data and government statistics.
Chainlink oracles allow Binance Smart Chain to tap into a wide variety of high-quality data sources to direct the management of assets on the Binance Chain. Automated trading and portfolio management is the next step in users’ abilities to tap into Binance’s liquidity on their own terms.
Note: chainlinkecosystem.com does not claim any ownership of this content, all credit to Binance, view official announcement.