Chainlink achieves scalability breakthrough with its Off-Chain Reporting solution

Chainlink has deployed its OCR solution to mainnet. Chainlink’s Sergey Nazarov says this will result in a 10x increase in the amount of real-world data that oracles can bring on-chain.

After a year in development Chainlink’s Off-Chain Reporting (OCR) solution has been deployed to mainnet. The launch will significantly increase the scalability of Chainlink’s decentralized oracle networks.

The company says the launch of OCR represents the single most significant upgrade in the history of Chainlink. It will act as the foundation on which it plans to accelerate the launch of additional oracle networks for DeFi and the wider smart contract ecosystem.

Chainlink’s team anticipate that its OCR solution will result in a 10x increase in the amount of real-world data that oracles can bring on-chain and available to smart contract applications. That is significant because DeFi’s growth is linked directly to the rate at which entities are able to put more data on-chain. A 10x increase in on-chain data would boost another wave of innovation across DeFi, decentralized insurance, blockchain-based gaming, and numerous other sectors, as smart contract developers leverage newly available datasets for a wider range of financial products and markets.

We spoke with Sergey Nazarov, Co-Founder of Chainlink. Nazarov says that at a fundamental level, the need for OCR speaks to the growing demand for reliable, high-quality data across the smart contract ecosystem.

“OCR enables the Chainlink Network to meet this demand by increasing the breadth and depth of the data being brought on-chain at scale, while maintaining the security which Chainlink is already so well known for,” explained Nazarov.

He said, by aggregating data off-chain, Chainlink’s oracle network provides trust minimized computation without requiring each node to pay on-chain transaction fees, drastically improving the efficiency of the network.

“OCR is leading us towards a 10x increase in the amount of data being brought on-chain thanks to a near 90% reduction in on-chain costs, sparking a virtuous cycle in which new data results in new smart contract applications being built, which in return results in demand for even more secure data,” said Nazarov.

The OCR Solution

Off-Chain Reporting (OCR) was built by Chainlink Chief Scientist Dr. Ari Juels, Ben Chan (formerly of BitGo), and Christian Cachin, a Swiss cryptographer and computer scientist and ex-head of research at IBM.

In an announcement today, Chainlink said that its Off-Chain Reporting solution achieves a significant improvement in the efficiency of how data is aggregated by Chainlink oracles. This results in a 90% reduction of operating costs and enables the Chainlink Network to accelerate the development of universally connected smart contracts.

The announcement says that the most immediate benefit to the DeFi ecosystem will be a tenfold increase in the amount of real-world data available to smart contract applications. The solution means that smart contract developers will now have the ability to use newly available datasets across a more diverse set of assets, real-world events, and blockchains, allowing them to service new industries and unique use cases. Chainlink anticipates that this increase in on-chain data will enable a new wave of innovation across the smart contract ecosystem including DeFi, decentralized insurance, and blockchain gaming.

During the last twelve months the Chainlink Network has been working to increase the amount of data it provides on-chain. It has achieved this with the rollout of new features such as decentralized Price Feeds, Proof of Reserve, verifiable randomness, and more. However, Chainlink says that OCR’s scalability improvements will accelerate this trend.

Chainlink OCR is expected to accelerate the number of Chainlinked smart contracts

Additional Benefits

OCR represents the third version of the Chainlink Core client run by Chainlink nodes. Chainlink says that all Chainlink nodes operating in-production will now run OCR and FluxMonitor clients in parallel to achieve scalability and security improvements through redundancy. It says “Multi-client diversity ensures automatic failover protection in the event of any potential black swan event, further enhancing the hyper-reliability of the Chainlink Network at all times.”

As well as increasing the amount of data available on-chain via the launch of new oracle networks, OCR also enhances the Chainlink Network in the following ways:

• Increased decentralization of oracle networks to generate additional accuracy, availability, and tamperproofness for Chainlink users.

• Reduced deviation threshold for on-chain oracle updates to provide even more precise data to smart contract applications that may be more sensitive to small price movements.

• Cost-efficient onboarding of new nodes to further decentralize participation in oracle services run on the Chainlink Network.

• Reduced on-chain network congestion by lessening the load Chainlink oracle networks place on high-demand blockchain networks like Ethereum.

• Reduced oracle network latency to ensure data is rapidly provided to smart contracts even during blockchain network congestion and extreme market volatility.

The Foundation for Trust Minimized Off-Chain Computation and Advanced Smart Contract Applications

OCR Chainlink nodes are now able to communicate off-chain, enabling them to aggregate data with zero gas costs using a decentralized peer-to-peer network.

Following order of magnitude improvements in scalability, security, and performance due to the OCR solution, each node can source data from one or multiple sources, signing it with their unique private key, and broadcasting it to the rest of the oracle network off-chain. Once a sufficient threshold of responses have been generated, a single transaction is transmitted on-chain containing every node’s observation.

The oracle report and node signatures are then validated on-chain by a smart contract, preserving Chainlink’s oracle networks transparent and tamper-resistant properties.

Chainlink OCR scales oracle networks by aggregating data off-chain and submitting a single transaction on-chain.

The company says that OCR will allow its oracle networks to perform new types of off-chain computation in a scalable way. “Whether it’s combining numerous data types to build on-chain indexes or calculating insurance quotes using a variety of parameters, OCR will allow the Chainlink Network to provide smart contracts with a more advanced and broader range of trust-minimized computations, further enabling smart contract applications to generate real-world value for users across different industries,” it said.

For example, OCR will be used as the computation framework for Chainlink-powered oracle networks to start supporting Fair Sequencing Services (FSS) and DECO at scale for a cost-efficient price. This will allow oracles to process large amounts of transaction volumes to fairly order transactions from a high-volume mempool, as well as generate distributed keys and ZKP proofs for data privacy.

OCR is live on Mainnet

OCR has already been deployed on mainnet across a majority of Chainlink Price Feeds. This includes the widely used ETH/USD and LINK/USD feeds. The company says that OCR will be rolled out to all existing and future Price Feed oracle networks going forward. As a result, the ETH/USD Price Feed has achieved an increase in decentralization, as it now consists of a total of 31 independent and security reviewed node operators.

ETH/USD Chainlink Price Feed with 31 security reviewed nodes

Developers who wish to integrate a Chainlink Price Feed, or build a custom oracle solution, can refer to the technical documentation on contact Chainlink to discuss further.