Hi, I'm the co-founder of Chainlink, Sergey Nazarov. Excited to be here.
I think the way that the MAS and Guardian are influencing the beneficial evolution of blockchain technology is that they're creating a good regulatory environment in which transactions can happen. For financial institutions, it's very important to be compliant. And that compliance is very difficult to do when you have some kind of adversarial regulator or some regulator that isn't creating clarity. And that often slows down the progression of a transaction. The MAS has done a really great job in creating the Guardian framework and just a very positive environment for transactions to happen. One of the Guardian transactions we've been involved in was actually with ANZ Bank from Australia. So the Guardian framework also includes international firms and the other transactions have been with UBS and SBI. So also international firms. So it's a framework that's attractive to both Singapore based entities and to entities outside of Singapore because it creates that kind of regulatory safety to do a transaction.
The appetite for blockchains, smart contracts and oracle networks in Singapore and Asia in general, I think is rapidly growing. It's rapidly growing because the regulatory landscape here is very positive towards cryptocurrencies, blockchain, smart contracts. And it's rapidly growing because it has a lot of benefits to both the institutional user base and the retail user base. On the retail user base level, there's a lot of payments benefits and an evolution of how payments works. And on an institutional level, there's the ability to create and access new financial products like tokenized funds, real world assets, and others. So, I think eventually what you'll see in Asia is the merging of the payments innovations in the blockchain smart contract world like stable coins and the evolution of the innovations for generating next generation of financial assets like tokenized funds. And those innovations coming together will end up creating a very big market. And that market basically requires what we make at Chainlink, the various data oracles, the cross-chain interoperability protocol, the identity connectivity to do the transactions and eventually we see all of those transactions being defined in the Chainlink Runtime Environment. So I think the growth of this market where the Chainlink community and the Chainlink standard is very active is very positive for the market and also very positive for the adoption of Chainlink.
Enabling Swift messages and Swift payments to interact with blockchains and smart contracts is very useful because of the very large user base on the Swift network. There's over 11,000 members in the Swift community, the Swift network. And those members are not individuals. They're the world's largest banks, the world's largest financial institutions. And so that's basically the whole global financial system that is sitting on a standard and on a way to do payments and giving that large user base access to blockchain assets, digital assets, DeFi, whatever set of blockchain events that they want massively opens up the market that is available for interacting with blockchains. So I think the real benefits to the Swift community will be their ability to interact with various blockchain based assets, digital assets very efficiently through their existing systems. And I think the benefit to the blockchain community and to the digital asset issuers will be that they have a much larger user base that can use their assets through a method of payment that they're used to. So you're basically enabling an existing system to be reused as a form of payment, which means everyone on that system becomes a potential user, a user base for crypto and for blockchains and for private chains, for digital assets. And then the frictionless way of using blockchains benefits the users because now they can interact with all these valuable onchain assets and events using systems that they already know and trust like the Swift messages and the Swift network.
So tokenized funds are the main trend that is driving forward the adoption of blockchains and smart contracts in the financial institutional world. The reason for that is because some of the world's largest asset managers like BlackRock released their own tokenized funds. That has led to a very powerful trend where the buy side is now driving the adoption of blockchain technology which historically is a very meaningful important kind of signal to the rest of the market that this trend will only continue and be a critical part of how they operate. So I think what you see with fund administration is that it closely follows what fund managers do and if in this case fund managers are making tokenized funds the fund administration world has to follow very closely behind that because they want to continue to service the asset managers who in this case are making tokenized funds. So the things that we've done with UBS, SBI, Swift, and the things we've announced here at the conference are that you can basically take the existing fund administration infrastructure and reuse it in order to utilize all of its legal benefits, operational benefits, security benefits, and reuse all those benefits onchain. And so what we've done is we've allowed NAV data and various other fund administration operations to happen onchain, but they happen onchain by connecting with the off-chain version of that system. And this basically takes the amount of fund administration and the amount of tokenized funds that can be made efficiently across hundreds of different top tier asset managers from a handful of asset managers to all of the asset managers. Because now to make a tokenized fund from the fund administration point of view becomes a lot easier. And then what we also showed is how the Swift payments could be layered into that fund subscription and redemption flow so that you could essentially buy your way into a fund or sell your portion of the fund and receive payment in Swift. This also removes the friction of actually interacting with the fund such as subscribing and buying into it. So basically what Chainlink and the Chainlink community are doing just like they've done for DeFi is remove the friction of utilizing and building these advanced financial applications.
Chainlink powers the majority of DeFi. It powers it because of the security and how it solved a lot of these key technical problems and made the applications reliable and usable. And now the same thing is happening in the capital markets community where the ability to interact with fund administration tools that are offchain, Swift payments and any number of other key capabilities that the capital markets are used to having now Chainlink is able to wrap around those capabilities and make them available from the traditional providers of them to the blockchain-based onchain world.
So some of the key benefits of using CCIP especially in cross-border transactions is the ability to not only securely and reliably transact across chains but to do it in a way that is compliant. So cross-border transactions especially across counterparties that are in different jurisdictions basically require compliance with two sets of rules and two sets of laws. This compliance is the main limiting factor for most cross-border transactions to happen. And what CCIP does is it creates secure connections across multiple chains. But then it has a way to ensure compliance by creating conditions under which the transactions can and can't happen. This is why ANZ is using us for a transaction with ADDX from Sydney to Singapore and why many other institutional users are adopting CCIP. It's that it's a very widely used form of cross-chain communication and value transfer, but also because it allows them to transact in a way that complies with all of their legal requirements, which is a firm requirement from the institutional world. While CCIP can connect you to many many counterparties, including in the DeFi space, there's basically no other cross-chain systems that can create the level of compliance that CCIP can. And then when you layer on all the data capabilities, identity capabilities, all the other capabilities made available through Chainlink into that transaction, you basically realize that when you have CCIP and Chainlink and the rest of the Oracle networks working together, you can build a transaction that is going to happen securely, reliably, and in a way that complies with all your requirements, identity requirements, data requirements, accounting requirements, all of them. And that's something that at this point only Chainlink can do.
So the Chainlink Runtime Environment improves the development of new financial applications by enabling developers to very quickly coordinate multiple chains, multiple oracle networks, multiple off-chain data sources and payment systems and even multiple off-chain computing resources into a single application. So the problem with making advanced blockchain applications is that you have to stitch together multiple chains, you have to connect multiple oracle networks, you have to provide access for multiple data sources. Maybe you want to include the ability for an AI computation to evaluate some of the risk of the transaction. Basically, there's a number of different disparate systems, some of which are onchain, some of which are off-chain, and many many more onchain systems now that all have to interconnect. Historically, the way that's been done in the Chainlink world and how that's been done in the blockchain world generally is basically stitching all those things together with little pieces of code much of which is insecure and not something you can prove to anybody. What the Chainlink Runtime Environment does is it gives you a place to run a single piece of workflow code often in languages that you're familiar with like Go, TypeScript, and others. And then running this single piece of workflow code in a language that you and your engineers already know, you're able to coordinate all of the systems that need to interact in order to make an advanced financial product on chain. And this coordination is quite valuable because that is where people spend most of their time. It's how do I get my financial application on chain to interact with 15 different chains? How do I get the data in there? How do I prove identity to it? How do I do a Swift payment that can be redeemed within the application? All of that complexity can really be resolved if you have a single piece of code that can coordinate all those resources into a single application. Now, I've been building smart contracts basically since they came into existence, well before Ethereum. I've been in the blockchain industry since 2010. And so there's a lot of experience in our team and from my point of view on how smart contracts can be built to do reliable high-value things. I've really never seen more powerful smart contracts get built than in the CRE. So I myself have sat there with engineers and seen how we've built certain more advanced smart contracts that interact with multiple off-chain resources, multiple Oracle networks, multiple other chains. And what usually would have taken months or weeks takes days with the CRE. And we're working towards the outcome that it will take hours. What this does is it basically massively lowers the engineering effort and the engineering cost of building advanced smart contracts which massively accelerates the speed at which those smart contracts can be offered to the market which massively increases the amount of high-quality inventory and the high-quality financial products out there in the market. And you've seen a similar dynamic in the past. So in the 1970s you had COBOL which coordinated the first mainframe technologies. Then you had the JRE, the Java Runtime Environment which in the 90s created some of the first web-based financial products and powered a lot of them even until now. With the CRE, the Chainlink Runtime Environment you're coordinating all of this blockchain complexity together with off-chain complexity into an advanced application. You're doing that through one piece of code and that's taking down the amount of time and effort that you have to take to do that. And that's a huge improvement in how quickly a single engineer can iterate and build really reliable high-quality financial products that work on chain DApps, digital assets, real world assets, whatever we call these things. If you can take people from building them over the course of a few months to a course of a few hours or the course of a few days, that's a huge, huge improvement.
I think the biggest breakthroughs for Chainlink in 2024 have been the uptake in the adoption of Chainlink as a standard across both data, cross-chain, and computation and the ability to compose all of those different capabilities into advanced smart contracts and that we're seeing more and more DeFi teams, traditional finance teams doing that and using that stuff towards production and on production. So that's a very exciting development. That's what the platform was built to do. It's successfully happening and we're seeing more and more of it in an accelerated pace. I think another big breakthrough is the massive rate of adoption of CCIP in the capital markets and the ability for it to connect multiple independent financial institutions together into an internet of contracts. That adoption I think is really exciting because you're basically seeing the emergence of a global standard for how transactions across blockchains work. And then that standard is already in use in the DeFi community and then the DeFi community and the TradFi community can hopefully merge into this single internet of contracts using CCIP and the data standard and others. And the other big breakthrough that I'm very excited about is the Chainlink Runtime Environment. And the Chainlink Runtime Environment which is already being used for certain things is getting the whole space to a completely new way of building advanced smart contracts by having a single piece of code coordinate all of the different chains and all of the different oracle networks into a single unified application, a single unified smart contract. I think those developments are really exciting because if you put them all together, what you'll see is a whole bunch of services, Chainlink, Oracle network services that act as kind of decentralized microservices that let people build these more advanced applications in a highly reliable high-quality way. Then you'll see people using the cross-chain interoperability protocol that after you've built the application using the data services and the compute services and others that application gets connected to many different chains so it can receive payments so it can interact with the users on those chains and the wallets on those chains. And then what you see is really the future with the CRE, the Chainlink Runtime Environment where the coordination of all those resources that I just talked about and the interconnectivity across all of those chains gets managed through a single piece of code in a language that a developer already knows like Go, TypeScript, and we're considering others like Rust and others. So I think you're kind of really seeing Chainlink emerge as a standard that goes very far beyond transmitting of data and into the world of cross-chain, into the world of computation. I think you're seeing the future in the form of the CRE where you can actually manage all of this complexity with a single piece of code that's easy for developers to learn and do because it's in languages they already know and can allow them to build really advanced applications. So I think those breakthroughs are pretty significant.
My view on what's going to happen next with blockchain and smart contract and Oracle network adoption is that there will be regulatory clarity. That regulatory clarity will massively accelerate the adoption of blockchain smart contracts and Oracle networks in various geographies where that clarity happens first. As that clarity allows more and more transactions for larger amounts from institutions to DeFi and from DeFi to institutions, you're going to see that the user base of both of these places are the DeFi users using the TradFi products and the TradFi users wanting to interact with the DeFi products. And so what you're going to see is that both of these groups that seem like they're pretty separate, once they can legally interact with each other, they'll begin interacting in very valuable ways. And then you'll start seeing that go across borders because people in one geography already have a certain set of financial products and counterparties and another geography might have another set of financial products or counterparties that they want to transact with. So you'll start to see a kind of global unification around how do you transact across blockchains and the cost of having blockchains will go down even more. Everyone will have many many different chains and those chains will need to interact and connect and they'll need massive amounts of data, massive amounts of identity proofs. This is kind of the world that I personally expect to have happen. And my view is that Chainlink as a technology and as a protocol, as a set of standards should serve that world's transition into this new blockchain-based smart contract powered form. Right? So in order for this transition to happen, you need the blockchain as the place where you have the ledger. You need smart contracts to change the ledger according to a set of conditions and then you need oracle networks and all the existing world systems integrated into those smart contracts as well as the ability for the smart contracts to interact across chains reliably. This interaction across chains, this interaction with existing systems, this interaction with data, this interaction with all the other smart contracts in the universe of blockchains is basically what the Chainlink protocol and standards facilitate and allow to happen. It's really quite important because if you can't interconnect all the smart contracts and if you don't have data and if you don't have identity, our industry won't be able to go to the next stage which is that it will define how the global financial system works. I think where we're going next is really that the blockchain format, the smart contract format, oracle network powered smart contracts, workflow code, coordinated advanced smart contracts are how the whole global financial system will end up working and the DeFi community and all of those public chain things will become a part of that global financial system. They'll be a very significant innovative part that the traditional financial system will want to interact with. But then also from that big market you will have a lot of interaction with the traditional financial products that the traditional firms launch onto their blockchains.
