Editor’s Note: If you sat in on UMA’s January 10th’s community call, you’ll know I took a big whiff on this one as I was speculating on what #HuevosRancheros is going to be. A BIG piece of alpha was dropped (perhaps another article coming out soon once more details are released) which may fundamentally change the way UMA is integrated, but it isn’t tied in with UMA’s Optimistic Oracle.
Hey folks, in today’s article, I’m going to talk about two OGs of this space — Chainlink and UMA — and why I think that when all the memecoin-driven-hype has settled, the #RWA-narrative will hit its final form when blockchain technology fully integrates with real world assets. And I’m not talking about just getting a tokenized gold bar, but by actually settling all real world transactions in a trustless decentralized manner. How you ask?
First let’s talk about Chainlink
For most people in crypto-twitter-land, the majority of people still see Chainlink as simply the price oracle feed for crypto. The name Chainlink gets thrown around repeatedly because our relatively small DeFi ecosystem requires real time price feeds to help ensure on the backend the proper value of every DeFi transaction goes through. This may be true, but to simply refer Chainlink to a price feed is only seeing the tip of the iceberg. With the release of CCIP, Chainlink offers interoperability between different blockchains, with increased security and composability. But as we’ve seen recently from different tweets coming out of ChainLinkGod.eth, the vision is becoming much bigger than that.
The next “link” (pun intended) is to connect off-chain transactions to the blockchain, or in other words, to bring all the beautiful transparency and security that we love about blockchain technology so that all these real world external transactions can be brought on-chain.
When we talk about things like the $BTC Spot ETF getting approved, many get excited because it’s a signal that financial institutions are finally accepting $BTC into their 401ks. I’m not denying that this is extremely bullish news (especially for $BTC’s price action), but arguably the amount of $BTC that institutions are buying up will be limited to the percentage points that these financial advisors are willing to allocate into their portfolios for their retail customers.
Going beyond people’s $BTC and 401ks, what Chainlink is aiming to do is to scale much bigger than that as they can provide real world applications in any instance where a techinical/financial contract may be required. In other words, Chainlink already helps create consistency between different blockchains, so it makes sense that ultimately the next evolutionary step would to be to help bridge consistency with different real world systems to the blockchain.
Enter UMA
Last month I wrote about how Fore Protocol’s decentralized bookmaking incorporates a “people-powered oracle,” where NFT holders act as “Analysts” that can help index real-world events. Barely live for 3 weeks, Fore already hammered out more than $1 million in TVL, showcasing the use case of the blockchain when integrated with decentralized bookmaking. And because they’re dealing with the limitless potential of literally any market that’s connected to any real-world event, FORE has incorporated UMA’s optimistic oracle to accurately resolve any potential dispute that may occur.
Whether it goes through a series of Analysts and/or UMA’s Optimistic Oracle, once a dispute has been successfully resolved, no centralized actor controls whether or not funds get paid out, or how much they get paid out — instead smart contracts do. In fact, each role through Fore’s ecosystem is bound by smart contracts in order to make sure everyone follows the rules.
As Chainlink is trying to integrate off-chain connect transactions via blockchain, similar to FORE, this naturally positions UMA as the perfect partner to provide the final check that can ensure these transactions are correct by resolving potential disputes before they get executed.
Whether it’s to validate how many points will be scored in this year’s SuperBowl or whether or not a vendor should be paid for fulfilling their terms of service, each dispute can be resolved by real hUMAns who have staked $UMA (UMA protocol’s native token) — all who are incentivized to settle disputes correctly when earning up to 24% APR on their (correct) votes:
Therefore, just like as it has with protocols like FORE, UMA is essentially primed to be the conduit that can help Chainlink get the hUMAn component it needs in order to help bridge all of the disputes that smart contracts alone can’t read or decipher.
#HuevosRancheros
Based on the fundamentals of both UMA and Chainlink, it actually comes to no surprise that we’ve seen some big teasers that a big partnership brewing between the two are currently under way:
It’s unclear what or how this partnership will exactly look like, but my bet is that at the very least, both are combining in order to help bridge the much needed gap that currently limits many #RWAs from getting integrated onto the blockchain.
Conclusion
As this bull market rolls along, I think we’re going to be in for quite a rollercoaster of ingenuity as these different integrations and applications occur, especially when you have two major OG’s of DeFi learn to partner with one another, potentially bringing a limitless number of possible applications for #RWAs.
Could #HuevosRancheros just be a super-tasty breakfast? Sure. But I’m placing bets that this will be something worth a lot more. Interested in finding out? I’d recommend joining their Discord and hopping on to one of their community calls to see if they drop any more alpha.
And as always, thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Cheers everyone!
