Public Key Podcast

Web3 Adoption in Traditional Finance: Kemal El Moujahid Ep. 79

October 24, 2023 | by Chainalysis Team

Episode 79 of the Public Key podcast is here and we are happy that you love the refreshed look.  Bringing real world assets on to the blockchain will need safe, reliable and accurate data points. In this episode Kemal El Moujahid (Chief Product Officer) at Chainlink, shows us how we can connect web2 and web3 applications in a seamless and secure way.

You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 79.

Public Key Episode 79: Bringing real world assets on to the blockchain has never been easier

Real world asset tokenization is all the hype with traditional institutions looking to delve into the world of web3, but security, accuracy and reliability of data and price points, continue  to keep many on the sidelines.

In this episode, Ian Andrews (CMO, Chainalysis) gets to speak with Kemal El Moujahid (Chief Product Officer) of Chainlink, whose team is connecting smart contracts with Web2 systems. 

They delve into the benefits of Chainlink’s Cross Chain Interoperability Protocol (CCIP) and the potential for real-world assets and data to be integrated into the blockchain in a secure and trust-minimized way.

Kemal identifies the tension between speed and security in DeFi bridge transfers and the need for interoperability between chains, in order to unleash the real value of on-chain assets.

He also explains Chainlink’s role in providing connectivity and solving the limitations of smart contracts and how the future will be balancing real world assets with real world data and real world users. 

Quote of the episode

“But the fact that you could build something as a developer that could not be shut down, that could not cheat. You would write the code and it would run as is. So you get immediate, instant trust from everyone that your service will run as expected and that could carry massive amount of value” – Kemal El Moujahid (Chief Product Officer, Chainlink)

Minute-by-minute episode breakdown

  • (2:15) – Kemal’s journey from Google into the world Ethereum Virtual Machine (EVM) and smart contracts
  • (5:12) – Chainlink’s role in providing connectivity and solving the limitations of smart contracts
  • (8:58) – The importance of oracles in connecting smart contracts with Web2 systems
  • (11:25) – Introduction to Chainlink’s Cross Chain Interoperability Protocol (CCIP) 
  • (13:55) – The tension between speed and security in DeFi bridge transfers
  • (16:02) – CCIP’s approach to waiting for finality on the source chain
  • (21:45) – The connection between SWIFT and CCIP for modernizing the financial system
  • (28:45) – Introduction to Chainlink Functions and its role in connecting smart contracts with Web2 APIs
  • (32:27) – Real world assets, real world data, and real world users

Related resources

Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.

 

Speakers on today’s episode

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Transcript

Ian:

Hey, everyone. Welcome back to another episode of Public Key. This is your host, Ian Andrews. Today I’m joined by Kemal El Moujahid. Apologies if I didn’t get the surname totally correct there, Kemal. You can correct me in a moment. Who’s Chief product Officer at Chainlink Labs. Kemal, welcome to the program.

Kemal:

Hey Ian. Thank you for having me.

Ian:

Kemal, I’m fascinated by your background. I know so many people right now that are rushing into the artificial intelligence space and you’ve actually gone the other direction. You spent a number of years prior to Chainlink leading the TensorFlow product team at Google but you’re now head of product at Chainlink. I had love to hear a little bit about your career journey and what led you into this world of crypto.

Kemal:

Yeah, sure. Well, so I think for me, the big “aha” moment … I think we all had our different moments with crypto, Web3. For me, the big moment was when the EVM came out. That really felt like something completely new and one of those big moments like … Well, internet was a big moment, right? You could get instant distribution for your content, your services. Mobile was a big moment, because as a developer, you could create something that could be in the hands of everyone with connectivity and sensors. AI, definitely a big moment, because now your apps are smart. But the fact that you could build something as a developer that could not be shut down, that could not cheat. You would write the code and it would run as is. So you get immediate, instant trust from everyone that your service will run as expected and that could carry massive amount of value.

Those three things put together felt something radically, radically new. And that was going to transform pretty much everything that we see around this. So that was the first big moment for me. And I’ve always been looking at this industry and wanting to learn more and to get in. I’ve been playing with smart contracts for a while and I think a couple of years ago it really felt … I could really see the acceleration of the adoption of the ecosystem and it went from this phase of very innovative, but trying to find its place in the world, to the phase where it starts being adopted more by traditional institutions and just before it goes mainstream. So that’s what got me in the space.

Ian:

Well, and you must have … based on what you just described, the rise of the EVM, the Ethereum Virtual Machine, and with it the creation of programmatic money or value transfers, that really started back in 2015, 2016. So you’re watching that happen while you’re busy at work in the world of TensorFlow. Were you writing code on the EVM? Were you building smart contracts? What was your level of activity before joining Chainlink into the crypto ecosystem?

Kemal:

Yeah, I was definitely playing with Solidity, seeing what the technology could do. I’ve had the privilege to witness a lot of those waves, AI before messaging, and it gave me a good feel of how mature a technology is for massive developer adoption. And so I was getting, trying those tools. I could see how sometimes they were very early and that’s what I meant by I sensed an acceleration a couple years ago of maturity of tooling. And I think It’s also when some … Chainlink became, very apparently to me, this missing piece.

Because every use case that I could think about that a real world use case that had real world value needed some connection with Web2 data or Web2 systems or AI systems. And we could … maybe we’ll talk more about some of those ideas. And so this incredibly exciting new primitive, those smart contracts, they were just not connected. So their power was really limited to the virtual machine and the idea that you could connect them with any Web2 system or you could connect them across many of those virtual machines that constitutes the various chain, became very, very obvious to me that that was the biggest unlock in that space.

Ian:

Yeah, it’s interesting. I think probably for a subset of listeners of this podcast, they’re intimately familiar with Chainlink, I imagine we’ve got more than a few of your customers, talking on the podcast. But I also feel like sometimes Chainlink flies a little bit below the radar, in that you’re an infrastructure technology, right? Can you give us the high level perspective on the portfolio that Chainlink has built?

Kemal:

Sure. So chainlink solves the connectivity problems. As I mentioned, those new primitives, those smart contracts, they have these incredible properties, but they’re limited in that they’re not connected to Web2 data or Web2 computation or Web2 system, that’s limitation number one. And limitation number two is they’re not connected with each other. Those chains are not natively compatible with each other. And so that prevents a lot of really interesting things. So there is this need for a connectivity layer, a connectivity standard, and this is what Chainlink provides. And we can go in more details about how we solve this, but at high level, this is what Chainlink does. It offers developers with a very simple way to build those apps that are composed by those … mix and matching those heterogeneous systems. And the first really big use case that really gave birth to DeFi Summer is taking a DeFi smart contract and connecting it with a price feed of a crypto asset.

And this is what Chainlink was originally and still very much known for, I would say probably outside of the industry, as the standard for delivering data for DeFi. But very quickly, the same technology, the same connectivity technology, started getting used for other use cases, randomness, to power gaming and NFTs. So as a consumer, you want to be interacting with something, which randomness is fair, it’s provably fair. And so that’s what Chainlink provides. Automation was another really important primitive. You want certain conditions to be executed at certain time at certain price points. Then you need chain link automation. And more recently, functions, which we launched it at ETHDenver. CCIP, which we launched in Paris, which is the Cross Chain Interoperability Protocol. Oracle. So Chainlink has expanded into this pretty massive platform and with three main primitive. Data, compute, and then cross chain, CCIP.

Ian:

Yeah, I think the thing that’s always struck me about Chainlink is it’s data combined with trust. That’s so powerful. It is not, “Oh yeah, I looked up the price of this asset three hours ago and it looked good in the thing that I looked at. And you can just trust me.” You’ve built a network that employs a lot of the same fundamental principles as the blockchain itself in order to deliver information that often originates in the real world or in a system disconnected from the runtime layer of the smart contract into that smart contract and able to extend the functionality or build more complex systems. Would you agree/disagree with that? That’s been my take as an outsider.

Kemal:

Yeah, so I think at the heart of the Chainlink platform is the notion of an oracle, right? An oracle is something that connects a smart contract with a Web2 system. Typically, it could be to get a data point but it could also be to execute something. You can imagine, I think we had someone at a hackathon that opened the Tesla via smart contract. So you can imagine that it actually enacts some action on the world. But then we’ve seen with function, people sending messages via Twilio. You can also process satellite imagery and detect whether there’s a forest somewhere and issue a carbon credit based on that information. So this idea can really be generalized, but at the heart of it, there’s this oracle. And what’s really specific about Chainlink is that those oracles are assembled in decentralized networks, decentralized Oracle networks.

And by using Chainlink as this platform is you’re not relying on one Oracle and you don’t have to trust one oracle to do the right thing or to not be down or to … You have this network that have to come to consensus. So in the case of a data point, you have your DeFi protocol, you’re securing billions of dollars of a position, and there’s the liquidation condition if the price of Ether in US dollar goes below a certain number, then you have to liquidate. You really want to make sure that this price point is good, is accurate. And this is where the fact that this network of oracle that will all go get different data points and come to consensus over the value of that data point gives you that really nice property of security and reliability. This is why Chainlink is really known as the standard in the industry for those properties.

Ian:

And from that basis, you’ve expanded quite a bit, and one of the things you mentioned just a moment ago was this CCIP that was announced earlier in the summer. I think It’s now live on main net. Cross Chain Interoperability Protocol, what is that? Why do we need it? What’s it going to do for people?

Kemal:

Yeah, so what’s happening is that we’re in an increasingly multi-chain world. There’re new chains popping up every day with new interesting properties because the space is exploring let’s get more throughput, let’s get lower latency, let’s get more flexibility, let’s get more programmability. Let’s have app change, let’s have subnets, let’s let you not have to share the bandwidth with other … which is a very natural phenomenon in expanding from the initial point of the industry. But as a consequence, you have this massively heterogeneous space, an increasingly heterogeneous space. And those different chains are just non-compatible. They’re not good at talking with each other, especially in a trust minimized, secure way. And this creates huge problems. So first liquidity is fragmented.

You have liquidity pockets in one chain, can’t be reused in another one. So you have some position in chain A, you want to use it as a collateral to borrow on chain B, you can’t do it efficiently. That’s problem number one. Problem number two is this is much, much bigger than just DeFi and Web3. If you look at TradFi, there are $900 trillion worth of assets that are just waiting to be tokenized. The tokenization trend is happening. It’s fueled by very, very strong factors, like putting an asset on chain just makes it much more … increases its utility and value tremendously. It reduces costs. So all TradFi institutions, they’re looking at how to put assets on chain. But the fact that those chains don’t talk with each other means that they’re going to move an asset on chain and it’s going to be trapped on one chain.

So why would you put an asset on a chain if it can’t move freely? So that’s also another really big problem for this industry to be fragmented. And the third one, which is maybe even a little higher level, is that if you look at the web, the web really grew because it was compos-able. Because as a developer, you could use what another developer that you don’t know from did somewhere and then you can just compose those things and build something even better. But if you have systems that are fragmented, you cannot compose things. As developer, I cannot mix and match the best of chain A with chain B. We were talking about AI before. As an AI developer, I can reuse a model that’s been built by people that I don’t even know, that I went and picked up on Hugging Face. So those are huge problems and this is why we set on to build CCIP.

And the way we went about it is it’s not just a technology problem, it’s creating a standard. What we want to do is we want to create something that everybody, uses and the more people uses it, the more powerful it becomes. Because the value of an interoperability protocol really lies in the size of the community that uses it. And so we set on to create a standard. And first property of the standard is security. We talk about security all the time because it’s the name of the game. That is what brought us to the position that we’re in. That’s what enabled all of our users and customers and clients to be successful. So that’s always going to be front and center. There have been a lot of hacks in the cross chain space and bridges. I think close to $2 billion stolen last year

Ian:

Yeah, easily. This was actually one of the topics I really wanted to dig in on with you because when I looked at CCIP, it seems to be an alternative to bridges that exist today, which have been notoriously the most vulnerable points across the crypto ecosystem. And I’m not deep enough in CCIP to really understand how it differs from a bridge or do you use it in conjunction with an existing bridge? So maybe we can go deeper on how does it solve some of the security issues that we’ve seen in the bridge layer of the architecture?

Kemal:

Sure. Well, it’s a radically different approach, and again, it goes back to this usage of these oracles and using them in networks, decentralized networks. So you have this very strong, reliable trust minimized glue, if you will, between two heterogeneous systems, which is very different than how bridges are traditionally designed. The other very big difference with CCIP is that we use defense in depth. We have different layers protection. We have the risk management network that sits on top of the actual infrastructure that passes the messaging. So you have multiple layers of checks that make sure that the information that had been passed from chain A and chain B is legitimate. And so I think, again, the design of the system, and this is something that our world-class research and security team has been working on for the past three to four years.

So this is also why we wanted to spend so much time testing it with our partners before we went live last July. So it is something that A, is deeply secure and something that we’ve brought the same infrastructure, the same decentralized oracle networks, that have processed a trillion dollars worth of value cumulatively is securing the same thing. And the second thing is I mentioned standards. We’re working with SWIFT, 12 of the largest banks in the world, we’ve announced something really cool with ANZ yesterday. Today with DTCC. This is what creating a standard means. We’re working with the largest DeFi protocols in the space to create, again, this interoperability language that everybody gets to use to solve the industry’s problem.

And the last thing is really flexibility. So this is more like the developer platform product person talking. We need to make this thing seamless to use, seamless to embed. Because at the end of the day, those innovations, they go through cycles. And the thing that really makes it go upward is when you can integrate them seamlessly with the existing infrastructure. So it never works to go to an existing player and say, “Hey, you’ve got to scrap everything because this thing is better.” It’s always, “Look, this thing brings you superpowers. This is how you integrate it into your existing stack.” And That’s also how CCIP has been designed. It’s super easy to use, it’s super flexible and matches all the use cases that we’ve observed.

Ian:

So just to maybe make it a little more practical for people, and then I want to come back to the SWIFT topic in a minute, because I think that’s important too. If I have my DAPP, let’s say it’s a DEX, running on Ethereum today, and I decide, hey, you know what? These layer two networks are getting really, really popular and I’d like to have my DEX also available on Polygon and Arbitrum, but I don’t want have to split the liquidity available in my DEX or I don’t want my users to be locked on only one chain and really have almost three separate universes. Maybe an option is to build my own bridge potentially but in a potentially simpler, and it sounds like much more secure path, would be to use CCIP. Is that the idea?

Kemal:

Yeah, absolutely. I would not advise a DAPP developer to build their own bridge. Very much like if you’re an app developer, do not rebuild your own cloud, just use a cloud.

Ian:

Use Amazon, make it easy. Yeah.

Kemal:

Yeah. Or Google. But focus on the thing that makes your DAPP the best. And we use proven infrastructure from players whose bread and butter it is to make this infrastructure reliable and scalable and secure, et cetera. But yeah, you’re right, that’s the idea and that’s actually the difference between multi-chain and cross chain, right? I think multi-chain means, well, I have all these chains and I need to be present on all these chains and so I’m going to create a DAPP on all these chains. So if you’re on chain A, you can use my DAPP, but then you go on chain B, it’s the same DAPP but it’s a completely different environment. So imagine if the Google Docs on Mac was very different than the Google Docs on PC and you couldn’t reuse the same docs. That doesn’t make sense, right?

Ian:

I remember those battle days, not with Google Docs, but Microsoft Office, where it was very, very different. So the analogy carries with it some pain I can appreciate there.

Kemal:

Exactly. It’s a good analogy. That’s why cross chain is a much better way to go about this. Those apps are cross chain, they live in the same environment and the liquidity is shared. And again, you don’t have a different Google Docs on Mac and a Google Docs on PC. I’m going to stick with that analogy. Sounds like 

Ian:

One of the questions I had about this. With bridges that exist in the ecosystem today or preceding CCIP, it seems like there’s a tension between speed of transfer and security. And I think this exists going layer one to layer two, or layer two back to layer one. When you want to withdraw, you’re locked up for some period of time. And I think depending on the technology and the implementation, it could be days, it could be a week. And I sense that a lot of the reason behind that time delay is to ensure that transaction on one side of the two networks that you’re trying to move between is completed with finality or … before you allow it to unlock on the other side. How does CCIP tackle that problem? Where do you decide between those two if it is a spectrum, in fact? Where do you set the limit?

Kemal:

So again, going back to our secure approach, we are very much on the side of the spectrum of waiting for finality on the source chain. So what this means is when finality is fast, then a transfer is going to be like a couple minutes. But when it’s slower, then it could take more time. But again, it goes back to this design choice of if You’re going to be using CAP, you really care about the security of either the asset you’re transferring or the governance decision that you’re sending over to another chain. So we’re very much on the side of security here.

Ian:

And you just touched on something that I think is actually pretty interesting here. I always think about bridges as being a mechanism to move assets cross chain, but in the blog, which We’ll link to, you point out that this could be like voting, for example. So if you have a community where your community members are operating or holding the governance asset on multiple different chains, you can collect votes on all those chains natively and aggregate them via CCIP back to the primary chain. Did I understand that correctly?

Kemal:

Absolutely, absolutely. And I think getting back to the notion of … We talked about internet of contracts when we launched CCIP, but if you look, it’s this notion of compos-ability. Chains, there are a lot of new chains, they’re all really good in one dimension. Some chains are storage optimized, some others are … They all make different design choices. And the idea is to let you as a developer mix and match and pick the best contract, smart contract or use case, on each chain and be able to assemble these. I think this is why, for me, it’s such a huge unlock for the industry because, one, it solves this very clear liquidity asset moving freely across multiple chain.

By the way, private and public chain, that’s another huge angle, especially for TradFi. So we have all this value that we are looking to help flow in the industry. And then the other angle is this developer compos-ability idea of you now get to not have to reinvent the wheel, you can just pick a really, I don’t know, a smart login, plugin somewhere on some chain. You can use a very scalable, low cost chain for a certain transaction for gaming, for example. You could be storing your asset on another chain and just settle at whatever is convenient for you. I think that really opens up the design space so much.

Ian:

Amazing. Now you’ve got a bunch of use cases in the blog online about CCIP but the one that stood out for me was the one that illustrated connection of the SWIFT banking network. And for people that don’t know, SWIFT is basically this intra bank network that allows for settlement of funds between all the large banking institutions I think are connected to SWIFT. It’s often referred to as legacy infrastructure and that it’s been around for a long time. But I think more politely it’s a backbone of the global financial system. And it looks like you’ve brought a number of global financial services firms into this. What are they doing? What’s their interest in being able to bridge here and how are they using CCIP?

Kemal:

Sure. So first, I think as I mentioned earlier, what’s fantastic for banks and TradFi players in general with distributed ledger technology is that they get to move from a world where they had a front office, a middle office, a back office with systems that then they have to use to settle their trades with other partners who were on different systems. And now, if they can just represent those assets on a private chain or a public chain, now executing a trade is as simple as one API call. And so it’s fast, it’s easy, it’s more cost-effective. It is just this giant leap forward and that’s why they’re so interested in this technology. By the way, once the asset can move so freely, then this is where its utility becomes increased so much.

Anyone can program that asset, you get distribution for that asset, so that asset fundamentally becomes more valuable. So there’s a cost saving operational efficiency angle to this and then there’s just a pure, my assets are now more valuable angle to this. So that’s why they’re so interested in this technology. But what they don’t want to do, and which is completely understandable, is to have to deal with the complexity of all the different chains out there and the fact that chain A is not compatible with chain B, et cetera. And this is where CCIP in particular is so appealing to them because CCIP provides this abstraction layer to the world of blockchain. And this is why we’re so excited as well to be working with SWIFT because SWIFT is that messaging system that’s already embedded in all the practice, all the IT system, that those banks are already using.

So this is where you could see putting both together is so powerful, right? Because banks are already using SWIFT as a messaging system. You connect SWIFT with CCIP, which is this abstraction layer, to chains, and now all those banks are able to essentially make that API call that I talked about with their existing infrastructure and that’s what’s so exciting and powerful about these POCs that we’ve been working on with SWIFT. And we’ve announced this successful transaction by ANZ, which is one of the largest banks in Australia. Super exciting. Today we talked about what DTCC has been able to accomplish, essentially minting and issuing a bond token, sorry, and compatible with CCIP. And distributing them to SWIFT’s designated test wallets.

Ian:

It’s a pretty incredible approach to modernization of the traditional financial system, bringing it forward into the world of Web3, which is exciting. One of the other pieces of technology, you mentioned it briefly earlier, and it was actually the spark why I was interested in having you come on the podcast, when you introduced something called Chainlink Functions. Now, prior to my joining Chainalysis, frequent listeners will know I was in the world of developer infrastructure and platforms. I was at a company called Pivotal, and as I was leaving Pivotal, functions as a service, platforms were all the rage. It was the new developer paradigm, it was going to replace containers and virtual machines as the execution layer. Companies like Amazon and Google had introduced entirely new compute layers to support that model of execution. Cloudflare has jumped into the space with Cloudflare Workers. So in that context, what is Chainlink Functions? What can a developer do with it?

Kemal:

Yeah, so Chainlink Functions solves the problem of connecting your smart contract with any Web2 API you’d like. In a trust minimized way. There’s a very naive way to do this would be, let’s have my smart contract make an API call. And then what happens is you have one single point of failure that can be compromised, that can be unreliable. And so you lose that property of my service is trust minimized. It is decentralized. What Function does for you is it creates this connection in a way that is secure and trust minimized. So you can offer your users this property of I have … it is a smart contract that is extended by Web2 infrastructure in a fully trust minimized way. So let me maybe just give a few examples. I think I mentioned a few things already. I mentioned the satellite image. So imagine you said, well, I want to issue carbon credits on chain and I want to essentially link it to an image at a given coordinate and know whether there’s a forest or not.

And that’s my ground truth, it’s a natural satellite taking the image, and then I process it with AI and I want to know whether there it’s a forest or not. And then I’ll issue a carbon credit on chain. That’s one example. Another example, which would be the parametric insurance contract. If it rained during … Sorry, if it didn’t rain during this period, then you’re owed a payment. You need to be able to make an API call somewhere. For example, Google Cloud Weather API to determine whether there was rain or not during this period. So all these examples, they require this connection, this Web2 API call. And that’s what Chainlink Function does and it does it in a very … Well, you mentioned, it’s serverless. It is very much the AWS Lambda model where you say, “Just give me your code and we’ll execute it.” You don’t know which machine it’s going to run on, et cetera, but it’ll execute, right.

Here, it’s the same idea. You’re writing a smart contract and you want to write a piece of code, you want a piece of code with connectivity, with the ability to make an API call, to run on those oracles and we run them for you. So that piece of code could be, “Go fetch the weather data.” It could be, “Go fetch my script on AWS that has an AI model behind it.” And we’ve seen developers do pretty incredible things with that. By the way, this was something that was used by 80% of our hackathon winners. We had something called AnyAPI before, which was a similar-ish idea, but was really hard to use. So really this was our developer community telling us, “Look, you’ve got to build this for us.” Those are actually pretty easy. As a product lead, you have 80% of your hackathon winners using something, you know you’ve got to build that thing. And so when we launched it in ETHDenver, people were incredibly excited with this. I had the pleasure of being a judge at the hackathon, I was seeing some incredible ideas.

And I’m really, really excited to get this product onto see people come up with those new ideas. And I think It’s going to massively, massively expand the space in terms of what you could come up with and how can … These are going to be things that consumers will deeply relate with. I’ll give you just one last example, there’s this 13 year old hacker whom I met at ETHDenver and maybe he’ll recognize himself if he listens to this podcast, whose idea was to say, “Okay, well I’m going to use the Peloton API and I’m going to commit a hundred bucks that I will hit the Peloton every day for next 30 days. And if I do, then I get my a hundred dollars back. If I don’t then it goes to charity or something like that.” And I thought this was a pretty incredible idea of self-commitment and actually having something that will … the smart contract will just ping the API and decide and either you lose your money or you get it back if you actually hit the Peloton every day.

Ian:

I love that. That is very close to home. I have a Peloton that is currently collecting a little bit of dust in the basement. I’ve been running more than I’ve been cycling these last few summer months. I’m curious, from a practical standpoint, what do I have to learn or know to use Chainlink Functions? Is it a different programming language? Is it dependent on the API I’m connecting to? Is it Solidity because it’s a smart contract? How do I approach it as a developer?

Kemal:

It’s super easy, it’s JavaScript. So if you know how to write like a Lambda function, it’s pure JavaScript. So you say … And you use the Fetch API to go get data from whichever endpoint you’re interested in and then you can transform the data back to make it suitable to what the return value that your smart contract is going to consume. So there’s your solidity code, which is you writing your smart contract and at some point just say, well, execute my function and then that is just JavaScript code.

Ian:

Yeah. And how does the connectivity work between my smart contract, which is Solidity deployed on the Ethereum network, where is that fetch request that I’ve written actually running? That’s on the Chainlink network?

Kemal:

That’s on the oracles, yes,

Ian:

Yeah. Okay.

Kemal:

So the oracles, so this is where the oracles are not just data pass-throughs anymore. They’re actually delivering distributed compute for you and they’re coming to consensus over the results that compute. And this is the general direction that the Chainlink platform is taking, right? Starting from you need the price of ETH in USD to now you get to ask for some compute to be executed with connectivity, to having cross chain interoperability, messaging and asset transfer.

Ian:

That seems incredibly powerful. To me it sounds a lot like the Cloudflare evolution as well where initially they were a CDN. Here’s static data that I can serve all around the world really fast out at the edge, to now I’ve got compute alongside that so I can have dynamic data, not just static data being served. And then obviously connectivity to everything. So the model coming from a Web2 infrastructure world seems very familiar. What’s the timeline? So you’ve announced it, you’ve taken it through a hackathon. It’s available today on testnet. When should we expect to see it on main net?

Kemal:

Soon.

Ian:

Come on, you’re not ready to give us a date right now?

Kemal:

Working on it. Working on it.

Ian:

Okay. Working on it. All right.

Kemal:

Yes, yes. This is something that I’m very excited about. I think this is going to open some really, really great use cases. And also, well another … We’ve talked about AI. When we released it on testnet, I did this demo with a friend, Lawrence Moroney, Who’s AI lead at Google and we had a smart contract generate art with DALL-E. So you start seeing how now with a smart contract you can essentially leverage LLMs as well and do some gen AI. So yes, we’re working on it and it’s coming soon.

Ian:

That’s exciting. I guess people are going to need to follow along maybe the SmartCon event that you have coming up in a few weeks in Barcelona to hear more about that. I want to shift topics a little bit from the technology and talk a bit about … It seems like you as a company have done an incredible job pulling some big name financial services institutions into the world of Web3, right? The announcement with DTCC this week and you talked about the work with ANZ bank in Australia. When you zoom out a little bit from those particular institutions, what’s your sense of traditional finance and their appetite to be in the world of Web3 and cryptocurrency. Is it hesitation, is it eagerness? Where would you rate that right now?

Kemal:

Oh, I think the interest for distributed ledger technology is very high. And we touch upon those motivations. Because again, it’s this operation efficiency, asset utility. So I think that there’s a lot of activity in this space. And that’s why we’re so excited to be working with SWIFT and all those players. Because again, what they don’t want to have to deal with is the complexity of all the different chains and the fact that we offer an abstraction layer and an interoperative protocol, that we can essentially process any command they send to any chain, whether it’s private or public, is extremely exciting to them.

Ian:

It’s really powerful. Maybe to wrap up our discussion, one last question. Where do you see things going over the next 12 months? And maybe preview for us if there’s some big announcements coming at SmartCon, what’s on the horizon? You’ve obviously had a huge year with some big technology introductions, but I always like to look to the future and see what’s coming next.

Kemal:

Yeah, so look, we’re … The three big bets for us this year are oracles targeted derivatives market, CCIP and functions. And so we’re dead set on heads down, executing against those. They’re incredibly exciting. We’re seeing phenomenal feedback from our test users. And so this is really what’s top of mind for us this year. And yeah, you should definitely, definitely follow SmartCon. We are working very hard to make it a phenomenal event for the community and for the industry at large. And again, we’re very, very lucky to be working with phenomenal partners.

Now, if I take a step back, I think there are three things that are massively expanding the space that I think are going to accelerate in the next 12 months. The first one, we touched a bit upon that, is real world assets. Ultimately, you put more value in those systems and more exciting things will happen, right? I like to look at … There was the ChatGPT moment for AI. I’m thinking about what’s the ChatGPT moment for Web3. Maybe it’s going to be, “Oh, I just bought a house, I just bought a house. I just raised money in two minutes and bought a house with this app.” Maybe that’s the moment where everybody realizes, holy crap, that’s Web3? I can buy a house with Web3? And that comes from putting more assets on chain.

That’s accelerating and we talked about that. The second thing is real world data. For now, it’s been a lot of financial data and crypto prices data. But with something like Functions, I’m really keen to see what kind of data gets put on chain. It could be sports data. I don’t know if you follow the Rugby World Cup. I do follow it. Who won which game should be on chain for people to do exciting things about that. So it could be … We talked about satellite imagery. It could be any sort of data. Putting more data on chain will lead to more exciting use cases. And the last one is what I like to call real world users. What I mean by this is users who don’t know or care what a private key is and they just want to interact with this new world, via interfaces that they understand. And I think things like account abstraction, social login, social recovery, are going to be incredibly powerful to bring more people in the industry. And by the way, Chainlink is playing in all three of those.

Ian:

Not surprising.

Kemal:

So I think this is, if I take a step back, those are the three big trends I think that will massively unlock or bring this industry to the next level in the next 12 to 18 months. Let’s just give it 12 to 18 months.

Ian:

I love the outlook. I agree on all three points. Those are going to be massive movers for the ecosystem and best of luck to Team France in the Rugby World Cup. They opened with an amazing defeat at home over the New Zealand All Blacks, which I think people were very excited about.

Kemal:

I don’t want to jinx it. I don’t want to jinx it. I want to stay very, very cautious about this.

Ian:

Well, it’s going to be fun to watch the remainder of the tournament play out. Best of luck to your team in that tournament. Kemal, thanks so much for joining us today. It was a terrific conversation.

Kemal:

Thank you for having me.

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