The Increasing Inevitability of Hybrid Smart Contract Development

Published : Feb 16, 2023

Hybrid Smart Contracts

  • Hybrid smart contracts combine on-chain data with off-chain data. This smart contract development service offering provides businesses with connectivity to real-world data sources with consensus-based data validation. This blog gives you an insight into these emerging types of smart contracts and how they overcome the challenges associated with traditional smart contracts. 

    What are Hybrid Smart Contracts

    Hybrid smart contracts utilize decentralized oracle networks (DONs) for obtaining off-chain data. A DON is a peer-to-peer network with various participants that forms a consensus on data before sharing it with smart contracts.

    Thus, hybrid smart contracts can simultaneously process the off-chain data and maintain decentralization among networks. This feature enables the development of more advanced blockchain-based applications.

    Hybrid smart contracts

    Why Hybrid Smart Contracts

    Traditional contract systems in the business and legal ecosystem lack transparency and immutability. To address this problem, blockchain technology came into existence. 

    Blockchain smart contracts address the transparency and immutability issues of traditional contract systems. With self-executing programs, smart contracts establish automation across a blockchain network. However, these auto-executing programs fail when it comes to fetching data from outside the network, i.e., off-chain data. Thereby, blockchain networks become isolated from the real world. 

    A technology called Oracle tackles this issue by translating off-chain data for smart contracts.

    But this software is centralized, so there are chances of data manipulation.

    Here, hybrid smart contracts remove reliability problems that might occur while utilizing a single centralized oracle. 

    Also, Check:  Blockchain Interoperability: Importance, Challenges, and Solutions

    The Working of Hybrid Smart Contracts

    In a hybrid smart contract model, a smart contract sends a data request to DON whenever it requires off-chain data.

    An oracle smart contract within DON receives this information and creates a log event, entailing data request details.

    It alerts off-chain nodes connected with the log. These oracle nodes fetch data from the log event.

    Then, they use external sources, including APIs, to obtain information and place it on-chain for smart contracts usage.

    Before sending the data, oracle nodes reach a consensus to validate the data. 

    Benefits of Hybrid Smart Contracts

    A hybrid smart contract has all the benefits of a blockchain, including transparency, reliability, and trustworthiness. At the same time, it can extract off-chain data with the help of a DON. Some more benefits of a hybrid smart contract are the following:

    • High data correctness guarantees
    • Authenticity proofs (cryptographic protocols that verify individual data from outside sources) 
    • Consensus-based data validation
    • Availability of off-chain data to smart contracts
    • Good incentive compatibility

    Use Cases of Hybrid Smart Contracts across Industries

    Decentralized Finance

    People use multiple DeFi applications for lending, borrowing, trading, creating, and saving assets.

    These applications can rely on hybrid smart contracts to acquire, validate, and supply data from the real world.

    In this way, people get accurate and reliable data.

    This contract lets DeFi developers focus on their products rather than developing infrastructure to obtain price data for their smart contracts. 

    Also, Visit: Smart Contracts Development for DeFi | A Guide for Investors

    Weather Forecasting 

    Hybrid smart contracts easily allow the transfer of weather data onto blockchains.

    It enables businesses to create parametric insurance contracts that automatically give payouts during certain weather conditions. It can help farmers to rely on such insurance.


    Blockchains lack randomness in their functioning. So, blockchain apps that require producing random numbers are prone to hacking. So, games like PvP battles and prize pools face massive issues due to opaque randomness.

    A hybrid smart contract can generate tamper-proof randomness with the help of DONs.

    Moreover, smart contracts can change the reward distribution model.

    Gaming dApps can utilize hybrid smart contracts to fetch real-world information to process game functions that result in better performance.

    Dynamic Non-fungible Tokens (NFTs)

    A dynamic NFT is a non-fungible token that can change its metadata with external conditions.

    Smart contract developers encode it with a hybrid smart contract, which uses DON to interact with external data. Users can use this interaction for peer-to-peer trading, minting, or burning NFTs. 

    Also, Read: Dynamic NFTs | Understanding the Dynamics of dNFTs


    Hybrid smart contracts can expand growth opportunities for businesses using blockchain technology.

    With more data coming into play, they will gain widespread adoption.

    If you want to enter this emerging market, then it is best to pick the right partner for your upcoming project.

    Oodles Blockchain is the ideal partner for your blockchain project. Our smart contract developers have expertise in hybrid smart contract development. Contact us today to avail yourself of our services.

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