How Chainlink Keepers Can Bring DeFi to The Next Level

Chainlink is the biggest oracle provider

Chainlink was founded in September of 2017 by Sergey Nazarov, Steve Ellis, and Ari Juels, with the purpose of enabling smart contracts to securely retrieve accurate data from off-chain sources of data and information. In this way, Chainlink allows us to take off-chain data and use it on the blockchain. Before these kinds of oracles existed, the functionality of smart contracts was limited due to the inability to use off-chain data. There was simply no way for smart contracts to communicate with external sources. Chainlink solves this problem through its decentralized oracle network. Moreover, Chainlink is regarded as one of the most trustworthy and reliable oracle providers for platforms sector-wide and has become the benchmark for bringing real-world data onto the blockchain. They are also, by far, the oracle provider with the strongest presence throughout the market. For example, they are the exclusive oracle for Synthetix assets, a protocol we covered in a previous article.

Figure 1: Illustration of bringing off-chain data onto the blockchain via Chainlink (Source: https://blog.oceanprotocol.com/bridging-blockchain-to-the-real-world-using-chainlink-afcf19cfbb73)

Chainlink Keepers offers automated execution in the smart contract world

As mentioned previously, a big limitation of smart contracts is that they cannot trigger executions at arbitrary times or under certain conditions — usually, smart contracts are only triggered by transactions. There are several ways this problem can be “solved”, but most solutions are reliant on some form of centralized party (introducing a single point of failure). One could use an open market solution to ensure decentralization, however, the implementation here is often overly complex. In addition, these can end up having very high execution costs.

Keepers offer a new solution to these problems. Through its decentralized node network, smart contracts can outsource regular maintenance tasks in a trust minimalized manner, without nodes competing amongst each other [1]. Some examples of event-driven tasks that Keepers can automate are triggering yield harvest functions at optimal times, automatically rebasing token supply for stablecoins to maintain their peg, trigger DeFi trade execution, and release locked assets according to pre-defined timelines. According to Chainlink, “Keepers can support any of a wide variety of triggering goals, including price-dependent liquidation of loans or execution of financial transactions, time-dependent initiation of airdrops or payments in systems with yield harvesting, and so forth.” [2]

DeFi welcomes Keepers with open arms

DeFi Giants Aave, Synthetix, Bancor, Barnbridge, PoolTogether and Alchemix have already adopted Keepers. During the last Chainlink Smart Contract Summit, various CEOs of these top DeFi projects presented Keepers use cases and explained the problems this service solves for them. In the case of Aave, Keepers is used to automate the liquidations required for the protocol to remain solvent. To explain this simply: Aave has registered a Keepers job to trigger the liquidation anytime a user’s loan falls below the given threshold. Keepers now monitor the loan collateralization off-chain and call the liquidation function when there is under-collateralization, hence triggering the execution of Aave’s smart contracts to liquidate the under-collateralized loans.

Figure 2: Synthetix uses Chainlink Keepers to distribute rewards to SNX stakers (Source: Chainlink)

The classification of Chainlink according to the ITC

Figure 3: The Chainlink Tokenbase entry (Source: https://itin.itsa.global/VNCM0FFY9)

References

[1] https://docs.chain.link/docs/chainlink-keepers/introduction/

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

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International Token Standardization Association

International Token Standardization Association

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The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.