Monday, 03 August 2020

Googling the Blockchain

The world’s biggest search engine just made the blockchain more accessible and smart contracts smarter.
Ted held his betting stub in a deathly vice. Beads of sweat gathered around his upper brow despite the weather being a comfortable 68 degrees. As the horses rounded the final turn onto the finishing straight, the atmosphere was so thick you could eat it with a spoon.

Across the grandstand, ladies dressed in their finest stood up. Men armed with binoculars in the upper galleries reserved for owners stood up and Ted, along with thousands of others in the public galleries stood up.

The thundering of hooves on the final straight sounded like a storm approaching.

As the jockeys brought their whips to bear on their beasts of burden, urging them on with every muscle in their tiny bodies, the horses lined up for what would be a photo finish.

The announcer, voice slightly excited, raspy, hoarse even,

“And it’s the final stretch and it’s Lucky Break leading by a nose, Dashing Straits, Great Pretender, Supine Position and they’re coming across the finish line and it looks like it’s Lucky Break by a nose!”

The crowd roars, betting stubs go flying into the air like so much confetti in the public galleries. Overhead in the private galleries, another bottle of Dom Pérignon is heard being popped.

Ted can’t believe his luck. Clutching tightly to his betting stub as if his life depended on it (and in many ways, it did), Ted calculates just how much money he’s won — it’s more than a year’s worth of work.

At 40 to 1 odds, Ted’s bet on Lucky Break was literally, his lucky break.

As he wipes the sweat from his brow, Ted walks towards the winner’s booth to collect his winnings, already spending his newfound wealth in his head, when an announcement chimed over the public address system.

“Ladies and gentlemen, we apologize for this interruption. There has been an incident with regards to Race 6 and the stewards are investigating. Please hold on to your betting slips until we confirm the results of the race.”

Ted felt like he had been punched in the stomach. He held his breath for what seemed like an eternity, when the public address system came on again,

“Ladies and gentlemen, we apologize for this interruption, the stewards would like to confirm that the results of Race 6 are as published, congratulations to all the winners.”

Ted breathed out a long sigh of relief.

At that very moment, an entire family fortune hinged on the outcome of a steward’s decision.

And like so many things in life, whole futures can be determined by the arbitrary brush of a pen, the justice system or just pure luck.

Contracts Get Smart

Which is why when smart contracts came about, they were heralded as a means to effectively and efficiently execute contracts — being both the platform, the agreement, the judge and the executor.

But then who decides whether or not the thing which is anticipated to happen in a contract has happened or not?

While in theory it may be simple to say that something has happened, the devil, as always, is in the details.

Take for instance a smart contract for home renovation services which specify that work must be completed to a reasonable standard — what does “reasonable” mean? Who gets to determine what’s reasonable?

Then there are contracts which state that the buyer must procure at a reasonable price all major repair works — what’s a “reasonable price” — is it the lowest price? Or is it the best-value price?

Because there are so many subjective aspects that can be built into any contract, not just a smart contract, it’s very important for smart contracts to work in real life to have some form of “oracle” or as in the context of horse racing, a steward — as the provider of information to make determinations.

Googling Smart Contracts

So when Google announced last month that Ethereum app builders using Google software will be able to integrate data from sources outside the blockchain — it was a big deal.

Despite the rise of other cryptocurrency protocols, Ethereum continues to be one of the fastest platforms for decentralized applications and more importantly, it’s fast to write decentralized applications for Ethereum.

Since February, Google has made public, blockchain data for Bitcoin and Ethereum as well as Bitcoin Cash, Ethereum Classic, Litecoin, ZCash and Dogecoin, through BigQuery, as well as providing tools for how to use them.

But through its partnership with Chainlink, Google would be doing a lot more for blockchain technology.

Chainlink is a company that provides on and off ramps for information necessary to execute smart contracts — a service called an “oracle” that integrates data like interest rates and price information from traditional finance into on-chain smart contracts.

Currently, it can take from 4 to as long as 7 days to reconcile contracts in the financial markets, whether these contracts are for derivatives or equities.

And because information sources such as the New York Stock Exchange or a Bloomberg terminal means that the quality of the data is pure, all that’s required is to execute financial contracts such as smart contracts on-chain for certainty and efficiency — with one small catch.

Although Google’s work with Chainlink will make data much more useable on the blockchain, particularly by way of smart contracts — there’s still the issue of speed and capacity.

For now, Ethereum is still unable to manage the sheer volume of transactions that occur in the financial markets on a daily basis — as much as an estimated US$4 trillion worth of derivatives can be traded a day.

And while there may yet come a time when Ethereum will be able to handle the scale of such transactions, that time has yet to arrive.

In the meantime however, data is the first step to ensuring the sanctity of smart contracts.

One Small Step for Smart Contracts, One Giant Leap for Blockchain

Allen Day, a senior developer advocate at Google Cloud wrote in a Google Cloud blog post,

“[T]hese applications share a common attribute, they’re all using the crypto public datasets as an input to an off-chain business process.
“A business process implemented as a smart contract is performed on-chain, and that is of limited utility without having access to off-chain inputs.”
“To close the loop and allow bi-directional interoperation, we need to be not
only making blockchain data programmatically available to cloud services, but also cloud services programmatically available on-chain to smart contracts.”
To demonstrate, Day elaborated in the blog post how a smart contract application for a cryptocurrency like Ethereum could use the integration between Chainlink and BigQuery to settle speculative bets in prediction marketplaces, process futures contracts to reduce risk and make transactions more private.

Chainlink raised US$32 million in an initial coin offering (ICO) during the earlier days of the ICO boom in 2017.

But unlike other companies which were out-and-out scams or have since folded, Chainlink has continued to chug along and its facilitation of smart contracts could help enable more creative smart contracts such as those for when flights are delayed or for travel insurance.

Now to work on increasing the transaction-handling capabilities of blockchain technology.

By Patrick Pan
Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

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