EFFECT OF CHAINLINK IN DECENTRALIZED FINANCE

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High-quality oracle services have grown in popularity ever since Decentralized Finance (DeFi) became more well-known. After all, the majority of these initiatives make use of smart contracts in some capacity, and their correct operation also necessitates the usage of external data.

DeFi platforms that use centralized oracle services expose themselves to a variety of threats, such as flash loan attacks carried out by manipulating the oracle. This kind of occurrence has previously happened on numerous occasions and will probably continue to do so as long as centralized oracles are widely used.

Many individuals could be tempted to believe that Chainlink can address each of these issues, but that assumption might not be accurate. Despite the fact that Chainlink's technology is used by initiatives like Synthetix, Aave, and others, new kinds of hazards are also added. In the event that too many platforms depend on the same Oracle service, they will all experience disruptions if Chainlink fails to function as expected.

This could appear improbable. After all, Chainlink is a decentralized oracle service with no single point of failure, according to its claims. Nevertheless, a "spam attack" that affected Chainlink nodes in September 2020 resulted in the theft of up to 700 ETH from the wallets of the node operators. Although the attempt was immediately stopped, it serves as a reminder that not every system is impervious to hostile activity.

The technology developed by Chainlink has established itself as one of the foundational elements of the DeFi and larger crypto ecosystem. Trusted external data sources are one of the most crucial building blocks for a thriving on-chain ecosystem of businesses, even though doing so does add risks onto Ethereum DeFi.

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