Due to a technical glitch at the New York Stock Exchange (NYSE) on Monday, the price of Berkshire Hathaway’s Class A shares displayed a sudden drop of nearly 100%, leading to market chaos. This unexpected plunge resulted in trading halts for multiple stocks. Sergey Nazarov, co-founder of Chainlink, explained the important role that Chainlink’s oracle can play in such situations.
Chainlink’s decentralized oracle network, which was invented to address the inherent vulnerabilities of centralized systems, can mitigate these risks by providing accurate and tamper-proof data. These networks aggregate data from various sources and use consensus mechanisms to verify messages, ensuring data integrity and preventing erroneous trades and price manipulation. The combination of blockchain technology allows for real-time verification and automated responses to abnormal situations, thereby enhancing the reliability and transparency of today’s financial markets.
The invention of oracle networks like Chainlink is aimed at solving the issue of real-world price data for smart contracts. Smart contracts are not inherently intelligent – they require real-world prices to settle contracts, including futures contracts and flash loans, among other products. Without this valuable data, contracts are merely lines of code with little use in the business or financial world.
Oracle networks provide smart contracts with the real-world data they need to function as financial instruments and business contracts. They use a decentralized node network to process and verify data, ensuring that the data does not come from a single source and preventing single points of failure inherent in centralized information systems.
The Depository Trust & Clearing Corporation (DTCC) seems to have also recognized this issue, as it recently partnered with Chainlink to enter the digital asset space. Its Smart NAV pilot, which leverages blockchain technology to enhance data dissemination in the financial market, explores new opportunities for financial services through the integration of digital assets. Industry partners participating in this collaboration include prominent Wall Street giants such as BNY Mellon, JPMorgan, Franklin Templeton, Invesco, and State Street, indicating that traditional financial institutions have long been aware of this problem.