We’re at the forefront of a new financial system built on public blockchains with over $685M (USD)​ already locked up in decentralized finance (DeFi). These solutions are built on smart contracts, which are simple programs designed to automatically execute once a specified criterion is satisfied.

However, the data that decides this makes for a vulnerable Achilles heel that can put these funds at risk. ​How can we guarantee the security of immutable and permanent smart contracts that depend on data feeds and govern decentralized financial applications?

To answer this question, we must understand how decentralized applications use data and stop seeing data as simply an asset but as a primitive building block for the ecosystem of tomorrow.

What is DeFi and how does data play a critical role?

If you’ve looked into blockchain sometime during the past year, more than likely you’re wondering, “Why is everyone talking about DeFi.” DeFi is a movement aiming to rebuild the traditional financial system in a permissionless, transparent, open and censorship-resistant manner.

Think instant global transaction settlements. Think of peer-to-peer lending/borrowing. Think no more hefty fees from intermediaries.

A caveat to this is that blockchain networks cannot communicate or consume data external to their blockchain network. For example, decentralized applications (dApps) on Ethereum, by nature, aren’t able to tap into traditional stock prices or bitcoins price. This was until the introduction of data oracles — a technology that interfaces external data sources and APIs into compatible form to be used within a blockchain.

As users, we trust and interface with the front-end of technology applications every day but rarely do we consider what is going on in the backend — i.e. how the technology is programmed to behave.