**Chainlink Driving Smart Contract Adoption: Derivatives**

Chainlink Driving Smart Contract Adoption: Derivatives If you have been in the crypto space, you have probably heard the word "adoption". Adoption can be described for most as the promise that eventually blockchain will integrate with legacy systems bringing new found efficiencies to these systems. It was this promise of adoption, and prospective riches it could lead to, that gave steam to the cryptomarket rally of 2017. It was the realization that adoption was far off, that led to the devastating crash that followed. Almost three years later and it is starting to feel like the crypto space is getting ready to cash in on this promise of adoption. One project leading the charge of adoption is Chainlink.

Chainlink CEO, Sergey Nazarov, recently appeared live on Yahoo Finance, to talk about Bitcoin's recent rally. During his live appearance Sergey said,

"What we do at Chainlink, is we bring the technology that powers Bitcoin. To the derivatives market. To the global financial industry. To trade finance. To insurance…"

How close is Chainlink to bringing blockchain technology to these industries? Well Chainlink is already providing data in these areas in terms of decentralized finance (DeFi). Chainlink is currently powering crypto derivatives platform, Synthetix, as well as crypto insurance platform, Nexus Mutual. Both of these platforms skyrocketed, in terms of both price and use, during this Summers' DeFi boom. This is a great first step, but as mentioned earlier, for most people adoption is when blockchain will be integrated with legacy systems.

Is Chainlink close to integrating with Legacy systems though? In a post written the other day, I provided evidence that Chainlink may be close to adoption through an integration with payment service provider, PayPal. There might be an even greater opportunity for adoption though. Perhaps the most exciting and most frequently talked about of these 4 industries Sergey mentioned is Derivatives. If they were close to integrating with traditional market derivative platforms which organizations and companies would they need to be associating with? If there was any one organization it would be The International Swaps and Derivatives Association(ISDA). ISDA is responsible for creating industry standards and provides legal definitions of terms used in derivative Contracts. These standards are used throughout the derivatives industry, in which trillions of dollars are transacted each year.

The majors goals of ISDA are described as "to promote and improve the trading of swaps and derivatives, to develop a standardized agreement to serve as a template for swaps traders, and to reduce counterparty risk, by increasing transparency and improving infrastructure."

It is by helping in each of these key areas that Chainlink can carve out its' place as a bridge between traditional finance and blockchain technology. As outlined in their blog post on October 11th 2019. The Chainlink team is working on fulfilling these needs for ISDA. They have sections geared to improving infrastructure, improving transparency, reducing counterparty risk, as well as streamlining the process. Additionally it seems ISDA is open to working in the block chain space, co-authoring a whitepaper titled Smart Contracts and Distributed Ledger- A Legal Perspective.

In this paper ISDA, and their partners Linklaters, acknowledge the need for third party oracles. Additionally in this white paper, ISDA and Linklaters, differentiate Smart Contracts and Legal Smart Contracts as well as two different models, the external and internal model. Coincidentally Chainlink again shows conformity with the ISDA whitepaper as they released a blog post on November 12th 2019 titled Embedding Smart Contracts Into Our Legal Fabric, where they go into the differences of Smart Contracts and Legal Smart Contracts as well as the Internal and External models.

It seems that Chainlink is trying to comply with the standards ISDA is setting forth, but just how close are they to working together? It turns out there are quite a few connections which provide evidence they are working together. Linklaters, their partner on the whitepaper, are a member of the Accord project, of which Chainlink is also a member. Accord is actually one of the first partners listed on the Chainlink team's official partner list, and was also mentioned in the blog post above dealing with Smart Contracts and Legal Smart Contracts. We can see Linklaters is still working with ISDA to bring Smart Contracts to the Derivatives market as they spoke earlier this month at an ISDA virtual conference titled "ISDA Clause Library: Implementation and Negotiation."

Linklaters is not the only law company associated with Chainlink that has ties to ISDA though. In that same partners list, right under the Accord project, is OpenLaw. OpenLaw is a blockchain-based protocol for the creation and execution of legal agreements. OpenLaw also has been working on building block chain based derivatives for quite some time. In 2018 they built a mock call option for gold based on the price of ETH. At the time they were not publicly working with Chainlink, however even at this early stage they still understood the significance of Oracles, saying this…

"We've seen other attempts at executing options on a blockchain, but they fall short. The blockchain-based demonstrations move around assets, without using secure, real time oracles and are often untethered from a real world agreement necessary to manage and account for unforeseen risks or misunderstandings." Just like Linklaters, OpenLaw has also been speaking at ISDA conferences about Smart Contract based derivatives and from their tweets it would appear Chainlink is a vital part of their approach.

With Chainlink already powering DeFi based derivatives platform Synthetix, as well as what seems to be a close working relationship with Linklaters, OpenLaw and ISDA, perhaps the first true form of adoption is closer than it appears.