Chainlink offers confidential CCIP transactions for institutional users

Chainlink is exploring encryption services for institutional users that go through the native CCIP chain. The oracle producer aims to mix private and public chains while building its own encryption and decryption package. 

Chainlink may offer its institutional clients tools to use its native CCIP chain while retaining confidentiality. The leading oracle provider has tested its services with institutions and payment providers, including Franklin Templeton and UBS. 

Auditors can still track CCIP users  

The first financial entity to test the privacy tools will be Australia and New Zealand Banking Group (ANZ). It will apply the technology to real-world asset tokenization. The banking group will have the permission of the Monetary Authority of Singapore (MAS). Testing the technology is open by request for any institution that reaches out to Chainlink. 

The new Blockchain Privacy Manager will open an encryption-decryption channel to allow cross-chain transactions that are hidden from other CCIP users. Private institutional chains may still use CCIP for data transfers and record-keeping, as well as for cross-chain activities. Chainlink users will keep the keys to their end-to-end encryption. 

The confidential transactions will hide the token amounts, sender and receiver addresses, and other instructions. To comply with encryption regulations, Chainlink’s clients can choose to share their encryption keys with auditors, counterparties, or financial regulators.

In general, confidential blockchains have lost their appeal, as regulators demand full disclosure. Chainlink, however, will work with accredited entities, which have other reporting tools to remain compliant.

The transactions are still recorded and viewable by any third party, but the sensitive information will be hidden. Some of those data may be used to generate RWA and be assured of real reserves with off-chain records.

One of the main problems in the current on-chain space is the reluctance to make cross-chain transfers. Most chains try to protect their liquidity and rarely open active channels with other chains. In the case of bank or corporate private chains, interoperability would be key. 

Chainlink to work on ZK-proofs

Chainlink has not presented CCIP as a classic L2 chain. It has also refused to ride the ZK-proof hype. However, the oracle producer is exploring zero-knowledge proofs from the side of financial institutions, who can then post secure transactions without the need to share them with third parties. 

Chainlink will not release this technology for public access, instead starting out with a sandbox format. The potential for secure data will include information like personal names and registrations, credit scores or sanction lists. The bank will secure that information as a ZK-proof and then send it to verified nodes. After that, the institution can interact with other entities without revealing data on its side every time. 

The technology will allow users to verify bank balances or other data. They can also use the verification for additional actions or access. They do not need to prove the data again at every step. The data can also remain entirely off-chain, with no exposure in the public ledger.

One of the goals of Chainlink is to offer tools for connecting financial companies to public blockchains. Currently, companies are required to use existing public chains, which means they have to contend with the risks and limitations of these networks. Chainlink will offer dedicated smart contracts that can encrypt sensitive business information. 

Chainlink will also encourage the creation of bankchains, while aiming to build a wider network for trustless verifiable transactions between multiple entities. 

Chainlink also recently closed a successful test on running LLM for corporate data in a bid to offer a single format, verifiable on-chain information. 

Almost daily, Chainlink adds native crypto protocols to its list. The leading oracles are spread across 20 chains and 407 projects, securing more than $25 billion in value. Chainlink has been key for DeFi and accurate pricing information. Some projects build their own oracles, but errors can lead to exploits or flawed trading. 

Native LINK tokens soared after the recent news, trading at $12.19. LINK has awaited a breakout after months of trading in a tight range. LINK remains a utility token, offering limited staking returns. LINK is one of the few fully diluted tokens, with a capped supply of 1 billion tokens.