Binance to support DeFi through Chainlink collaboration
On October 25, Binance officially announced that it would be supporting growth of decentralized finance (DeFi) by collaborating with Chainlink to connect the cryptocurrency data on its platform to blockchains.
In its official announcement, Binance said that while base layer development is accelerating, it is important to remember that the logic behind smart contracts is reliant on the received data. This means that even with flawless code, unreliable data triggering the smart contract could fail. CEO Changpeng Zhao said,
“At Binance, we are committed to growing the blockchain ecosystem. We support the development of Decentralized Finance as an important part of the ecosystem. Binance works with many blockchain projects, including Chainlink, to bring freedom of money everywhere, and through the help of Binance data and Chainlink’s network, we can help accelerate the growth of DeFi.”
The post also expanded on how blockchains cannot interact with off-chain data without threatening their underlying security, due to the consensus mechanisms used on those blockchains. This required on-chain information is also why most smart contracts are built around tokenization.
“Many useful applications in DeFi, Insurance, Trade Finance, Gaming and more need access to off-chain data to replace backend business processes. In DeFi specifically, market prices are different across exchanges, but some hold more weight than others, given their differences in volume.””
By leveraging the Chainlink network, smart contracts will be able to directly access Binance’s data, employ aggregation strategies and incorporate different designs to secure connections.
To enable this integration with Binance’s API, Chainlink has built an external adapter, with a serverless architecture in mind, so any node operator can run as many external adapters as they require, while providing data. Binance also claims that DeFi products can use oracles to relay exchange instructions to automate certain actions such as peer-to-peer exchanges, market buys/sells and even, multi-user transactions.