The Chainlink 2.0 Whitepaper states, the off-chain services provided by Decentralized Oracle Networks (DONs) greatly expand the types of on-chain collaborations that smart contracts can support.
The Hybrid Smart Contract Protocols like Aave’s Money Markets, Synthetix’s derivatives platform, dYdX’s leveraged trading markets, Ampleforth’s algorithmic stablecoin, and several others were able to make use of the Financial Market Data available on-chain by the Chainlink’s decentralized oracle networks.
The Education series from ChainLink on Hybrid smart contracts point to how these contracts enable advanced forms of economic and social coordination that have the tamper-proof and immutable properties of blockchains yet leverage secure off-chain oracle services to attain new capabilities, such as scalability, confidentiality, order fairness, and connectivity to any real-world data source or system.
They have detailed more on: How Oracles Extend Blockchain-Based Collaboration – indeed highly trustworthy collaboration. The strength of collaboration comes with great belief, and it happens only with truth, ability, reliability. It is also based on the legal and business obligations and the rewards and penalties of actions.
A good contract system is important to avoid unfair influence over the enforcement infrastructure and prolonged arbitration process. Establishing trustworthiness is the pinnacle goal of Hybrid Smart contracts. And, every transaction happens with the investment of time and capital.
Collaborations on blockchains have become easier with the coming of Oracles and the introduction of hybrid smart contracts. Oracles provide secure gateways to data in a way making it possible for smart contracts to leverage the possibilities of Smart contracts. And Hybrid Smart Contracts make it possible to do those things which are otherwise impossible or not so practical to do on-chain. The rapid increase in DeFi is proof of the power of Hybrid Smart Contracts.
Reportedly, a hybrid smart contract is an application that consists of two parts: 1) Smart Contract code that runs exclusively on the blockchain, and 2) Decentralized Oracle Networks secure off-chain services that support the smart contract.
Both of these components interact with each other in a seamless and secure manner, thereby forming a single hybrid smart contract application. Several use cases which would not have been possible only with on-chain code, whether due to technical, financial, or legal constraints, have been made possible on-chain.
The good thing about Hybrid Smart Contract is that they bring together two different computing environments to create a superior application, which is not possible to achieve standalone by a blockchain or oracle network. This is because every computing environment specializes in providing, which the other environment cannot provide.
