What is: Hybrid Smart Contract
In the smart contract auditor’s work, there are a number of concepts which are not readily understandable from the outside. One of such concepts is the hybrid smart contract.
What is a hybrid smart contract?
Hybrid smart contract (HSC) is a combination of the code running on the blockchain (in other words, “on-chain”) with data and computation from outside the blockchain (in other words “off-chain”) provided by Decentralized Oracle Networks (DONs). Such contracts support forms of coordination which have the properties of a blockchain, but simultaneously put the select most secure features of off-chain oracle services to use in order to achieve new capabilities, like increased scalability or order fairness.
HSC composition
A hybrid smart contract consists of two parts: a common smart contract (a piece of code running on the blockchain itself) and a decentralized oracle network (an off-chain service supporting this smart contract). Interacting with one another, they form a unique application, in which on-chain code is granted new abilities it would normally have no access to due to technical or other restrictions and limitations.
Hybrid Smart contracts (hereinafter HSC) are aimed at synchronizing two fairly different environments in order to create a new, advanced application, combining abilities of a blockchain and an oracle network, in order to undertake tasks which neither of them could have solved on their own due to lack of some specific features. The on-chain code runs in its native environment, protected from unsolicited change but limited in functionality, while DONs run off-chain, providing the necessary flexibility.
Combination of On-Chain and Off-Chain computation. How does it work?
On-chain:
- Helps to provide authoritative custody of users’ assets and interacts with private keys.
- Executes the final settlement.
- Facilitates the correct functioning of the off-chain services involved.
Off-chain:
- Operates with and delivers data from external API to smart contracts running on blockchains.
- Carries out computations for smart contracts.
- Retransmits outputs of the code to other blockchains or systems.
HSC Role in the Global Industry
HSCs show a highly trustworthy and efficient collaboration between various parts of the global network and allow external infrastructures to connect to blockchains with zero backend changes. They also provide a good take-off to new unique use cases, among which is decentralized transaction ordering, and set up a precedent for economic fairness and transparency. A large number of industries have already incorporated HSC, including finance, supply chain, insurance, gaming, marketing and others.
Hybrid smart contracts Use Cases
There are many ways to use HSC. With the ability to combine on-chain and off-chain, hybrid smart contracts are useful in various fields, such as:
- Legal. HSCs are expected to replace traditional legal contracts which are more complicated, expensive and subject to loopholes.
- Candle Auction (Like EBay). Auction results randomizing
- Gaming world (like Axie Infinity or PoolTogether). Hybrid smart contracts are helpful in controlling the gaming model and reward distribution plans, and can help add more randomness to the game.
- Insurance and Weather forecasts (Like Arbol). HSCs help in collecting the data on the events in the world and update them within the contract, so it is always up-to-date.
- Identity cases. HSCs can collect personal data and ensure its safety and privacy
- Marketing. Hybrid smart contracts can collect notably larger amounts of information compared with traditional ones and perform more complex computations
- Satellite data collection (like Green World Campaign). HSCs can be used to collect data on regenerative agriculture undertakers and issue rewards to them.
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