Sergey Nazarov of Chainlink ETHDenver 2021 Full Transcript

Below is the full transcript of the Sergey Nazarov presentation on Chainlink at ETHDenver 2021. You can also find the video here: https://www.youtube.com/watch?v=QEXHItGXITY

Thank you for having me. Great to be here. Hi everybody, excited to be speaking with you again and excited to be at this great event where at lot of things get built and done. I think the first thing we should really discuss is, you know, what is going on in our industry and what our industry stands for, and what it is that we’re hoping to achieve by building all of this. I think that really goes to a core question of the trust that society has between different participants, both in the financial system and outside of it.

I think there is a really important concept on the shift that we’re now all apart of. And that concept is us going from a system of guarantees from paper and brands that don’t need to be honored, to a system of cryptographic guarantees that are enforced by math and will be honored.

And I think that this is the seismic shift, that we as an industry are driving, much like, you know, the printing press shared information, other systems like the loom changed commercial transactions around certain parts of the economy, railroads, various other advances in transportation, ships, insurance for ships, the internet to transfer information to people all over the world on really small cheap devices now, and now the way that people form agreements.

I think this is an idea that will go through the standard set of reactions that monumental changes have. And you know in the words of one of the people I tend to read and listen to on certain points, I think it has already been ridiculed to a certain degree. Its now becoming moderately opposed, and that’s probably still going to continue, and then its going to be accepted as self- evident.

And it’s really the role of all of us, as the people building this industry, to get it to be self evident much faster to the benefit of everybody. In our favor, we have all kinds of events that basically prove our point, and will and already are accelerating the rate at which the larger world wants to use the technology of blockchain, smart contracts and oracles.

The first use case I’m going to talk about is one that you’re probably all familiar with, its related to the recent online trading activity around Robinhood and a few stocks, and, or Stonks or whatever we want to call them. At the end of the day, the existing financial system is skewed to benefit certain, better resourced, better informed actors.

And it does that very well because it works in a certain state in predictable market conditions to enable them to make a lot of money, and this is because they have certain advantages because they figured out the system and sometimes they are able to bend the system to their advantage.

People participate in the system because its the only system they have, and they do want to participate in the global financial markets even if they have limited information, and even if they have limited control over the various risks that they are essentially involved in.

Now this system works fine while everything is fine and nobody really cares, but as Robinhood and Wirecard and others are now showing us more often on a faster and faster cadence, the issue really arises when this no longer works for certain parties.

And when it doesn’t work for certain parties in the system, the system stops. Because the parties were supposed to be benefiting from it no longer benefit from it. And that’s when the rest of the world and the average user find out how the system really works.

These types of things will continue, and they will only accelerate, and they will create a massive crisis of trust. Of trust in the systems that people rely on to transact with each other, to interact with the global market, whether it is for global trade, insurance, the financial markets, whatever it is.

The most recent examples are Wirecard, Robinhood now, and many others to come. But this is what I consider to be the redefinition of trust within human society. And that redefinition of trust is what our entire industry is about. It is about changing the way that people interact, in an economically, fair, transparent and fundamentally correct way.

Rather than the skewed and asymmetrically beneficial and often times predatory way, that people interact in many transactions now. Part of the reason this is possible is because its hidden, and its hidden under layers and layers of opaqueness and only revealed in extreme circumstances like this.

And really unexpected circumstances, that a system wasn’t built to properly handle and properly hide and massage away. But this will continue to happen, because more and more people are informed through the internet, more and more people have assets, global markets are fundamentally global, and there will need to be a solution to this problem of trust and proper interaction between people on the basis of trust.

So this is what I feel like we are all a part of; whether were building an application or developer tool, or a piece of infrastructure, we are changing the way that people will form their economic relationships with each other. And that will happen through certain flash points where there are problems, there will be all kinds of debate and violent opposition to certain changes to a system, but fundamentally because the system that we are building is better, it will win out as being self-evident.

That that is the way that people should relate to each other in terms of economic fairness, transactions, and how they will conduct their relationships within society. So I think its a very very important thing that were working on and I always look forward to this event because there’s a lot of very smart people here seeking to build something. But I just wanted to share with you, what I thought we were all doing as an industry and what were seeking to achieve.

The way we achieve this in decentralized finance is really by the creation of many autonomous on-chain services. Whether that’s a price feed, or a defi application, or some additional service that enables more things to be done, we are now, all of us, collectively building a large suite of services that are on-chain. And that large suite of services is ungameable, and transparent and able to be accessed by the larger global marketplace.

And just like the internet was laughed at as a way for people to transfer information or as a way to conduct commerce globally, it is now self-evident that the internet is the way to conduct transactions and transfer information. What we are doing now is what people were doing in the internet in the early 90’s, the mid 90’s, is they were building the initial use cases, and the services and the protocols that were then composed into more and more advanced use cases. And I think we should all feel very proud of that and take it very seriously.

I think people at this hackathon have basically two things, or three things they can really work on. I think they can build a use case, I think they can build a developer tool that interacts with existing services and makes them more consumable, or they can enable easier access to infrastructure for people to consume more infrastructure easily. I think when building services and when building these different defi applications you have a huge array of pre-built services.

You have a lot of protocols that you can combine in interesting ways, you have a lot of different pieces of data coming from something like Chainlink, whether its about weather or price, you have sources of randomness, you have a lot more building blocks than people had two years ago or even one year ago at this same event.

And the ability to compose those building blocks into new and interesting use cases is really what the first few years of the internet were about. They were about infrastructure getting to the point where people can combine that infrastructure with their ideas in an efficient way while maintaining security.

Now this is something that is obviously taking off, and its going to continue taking off for the simple reason that its still very early.

Defi is unbelievably early, its less than three percent of the value that it could be based on the value in the crypto format. So the migration of crypto value into defi will continue, and I think accelerate because of the transparency and the yield and the ability to manage counter-party risk, and that transition from paper based guarantees to math based and cryptography guarantees.

Because you can still have cryptocurrency but be given a paper guarantee that it is properly managed. Where as with defi you get a math based guarantee, which I think the people in our industry are really the first group of people that are going to realize this big difference, and benefit from that understanding.

I think the bigger picture here is the larger global market, and how the structural problems we will continue to see in the form of Robinhood , and other systems like that, will drive more and more people to seek safety in systems that give them cryptographic guarantees rather than paper guarantees.

And with each additional issue in each of these global industries, people will begin to ask this question and the protocols and the products that give them the answer will be the internet of contracts where they store all of their value.

Which essentially means that societies wealth and value will migrate to a new system of contracts that we are now in the process of building, even here at this hackathon. Which to me is mind blowing, because its a monumental shift to how society works.

Society is based on information and trust, that’s really a lot of what society gives people as well as resources and the ability to collaborate. And that’s the thing that we are building in the newest and most advanced form for society, in my opinion.

The way that we at Chainlink seek to help the amazing developers in our industry do this, is by providing them the many services, the many on-chain services that they need in addition to a chain. So if you have a chain, or you have your favorite chain or you have the place where your smart contract lives, and the blockchain can be viewed as a database and the smart contract can be viewed as application code. But all the other services like APIs and connectivity to anything else is really where something like Chainlink and the oracle networks that Chainlink makes come in.

We already provide a large amount of price and market data which essentially allows the global finance industry to make its way into blockchains, by creating financial products that give these cryptographic guarantees rather than paper guarantees, and that’s something where we’ve excelled and where we continue to have both an increasing breadth of different data that’s run by the original data source and by node operators, and the depth of data in terms in the massive improvements in quality were continuing to gain from more different data providers and higher and higher quality data providers across our network.

The second group is proof of reserves, where we are essentially able to prove things about off-chain assets, not on an annual basis with an audit but on a minute by minute or ten minute by ten minute basis, proving there is for example gold in a vault or assets in a bank account or you know, even tokens on another chain.

Proof of reserves is another powerful tool in the toolbox of developers because it allows the off chain worlds assets, mainly bringing the global asset management industry into the blockchain world, by proving that those assets are in existence and in a certain state. If something like proof of reserves existed and was functioning well before the 2008 financial crisis, its very possible that would have been softened or completely avoided.

Beyond our ability to provide price data and prove things about assets, we get into many other categories of data. Everything from insurance related data about weather events that can be queried and used to built insurance products, which are then fed back into the defi ecosystem as collateral to thousands of other pieces of data such as election results, really anything you can think of like IoT data and I really encourage people at this hackathon to explore both what they can build through the existing price and market data, the various insurance data and the many other types of data that were now making available both from original data sources running their own node and from Chainlink networks porting data from multiple sources to make it hyper reliable.

I think the combination of more and more advanced data, together with the protocols that allow that data to be combined into products, is really where one, two, three, five, ten developers can leverage their skills in the most efficient way. And they can build truly industry defining and industry changing financial products, insurance products, global trade products, prediction markets and whatever else they can think of. It’s really our goal to provide all of the data, and all of the inputs that people need.

In addition to that, I think its important for people to understand that Chainlink is not just about data, it is about an oracle network and oracle networks are actually responsible for everything that blockchains are not responsible for. So an oracle network is not just about delivering data, it is about providing all the services such as the trust minimized off-chain computation that is needed by a contract, right because smart contracts that run in these blockchain platforms are hyper secure and hyper reliable, but they are low on feature richness for security reasons.

Centralized systems have completely lost peoples trust in many cases, and will continue to lose peoples trust in almost all cases. Everything from social media to communications to now the financial system, centralized services are being viewed, even by the average person as unreliable and a place that they do not want to have a long term relationship with. I think the middle ground between highly centralized feature rich centralized systems and highly trust minimized but low feature kind of blockchain systems is an oracle network.

And an oracle network sits between all of the use cases and all of the blockchains which those use cases run on and provides it with all the other services that it needs. And all the other services is huge universe of inputs. If it starts at providing different types of data, it then quickly moves onto computations that blockchains generally speaking usually don’t do, and probably won’t do at scale and basically need to be done in a trust minimized way.

Its these trust minimized computations that oracle networks will expand to do in addition to data and actually the combination of those trust minimized computations together with data will enable once again a much wider realm of products to be built.

The first thing we have working and is now becoming massively used in the blockchain gaming community is verifiable randomness. We have that working for many different blockchain games that are already using in production, its going live on multiple different chains and you can easily use it on Ethereum to provide random inputs into games and, you know, other applications.

Beyond that, we are finalizing some of our plans around Keepers and the ability to maintain a smart contracts proper operation through a Chainlink network. Because once again, even dev ops and maintenance of contracts is basically given to an oracle network because it needs to be trust minimized.

And then beyond that, I think developers even at this hackathon can think about is how do I use the expanded computational capabilities of Chainlink and the adapter scheme that it has, to compute more and more advanced things in a trust minimized way, that doesn’t require me to disclose things to blockchains, so allows me to maintain privacy, while getting me the features that blockchains so far haven’t been able to provide.

I think this realm of services will continue to grow from us, so if you’re a developer and you want to build these cutting edge, truly world changing applications, we are fundamentally here to help you. We are here to help the developers of the world make trust minimized applications, make the decentralized applications that will be the new way that society interacts around various value, various information.

And to me, its very clear that is where everything is going because of the systemic and continued failure of trust relationships with you know, social media, communication systems, financial systems, and fundamentally our goal is to accelerate the transition to a truly decentralized and fair economic system.

So this is what were doing here at this hackathon, this is what we hope to enable, with you the great developers that we work with, and this is also something that we are thrilled to work with other people on within our team, so if this is a worthwhile goal and something that you think is worth pursuing and spending time building, we’d be thrilled to work with you on our team, we have a lot of positions open for engineers, product managers and all kinds of other positions both in operations and sales and all kinds of dynamics on helping people understand and get to this decentralized world faster.

So thank you very much, I am looking forward to the great things everyone is gonna build, and I think the future of how society interacts is really gonna be based on the work we all do together as an industry. So thank you very much.