The blockchain ecosystem has evolved from blockchain-based tokens to an array of advanced decentralized applications powered by hybrid smart contracts. However, smart contracts have one key problem: The closed-loop architecture that makes blockchains so secure prevents smart contracts from being able to execute their own functions, meaning they’re unable to trigger contracts to run based on predefined conditions, such as a token reaching a certain price, a loan becoming undercollateralized, or simply the time of day. Without the ability for smart contracts to autonomously execute, many advanced use cases remain out of reach. 

To work around this problem, some developers have been relying on centralized automation solutions or building incentives directly into their protocols to encourage externally owned accounts to trigger specific functions. However, this introduces a whole range of risks and undermines the security guarantees that make blockchain-based applications so valuable in the first place. For example, the incentive system deployed in the Ethereum Alarm Clock, one of the first smart contract automation solutions, meant that it was possible that transactions would not be executed at all.

Thankfully, there’s a highly secure decentralized automation solution that developers can use to automatically trigger smart contracts without needing to deploy centralized bots or rely on bounties. Chainlink Automation enables smart contracts to be triggered automatically in a highly reliable, cost-efficient, and decentralized manner, and has already powered tens of thousands of automated transactions.

This makes Automation an essential part of Web3 infrastructure, as it allows developers to leverage smart contract automation to build feature-rich dApps that are fully decentralized end-to-end, helping them realize the promise of Web3. 

Issues With Centralized Automation for Smart Contract Functions

Centralized solutions that automate smart contracts can introduce an array of risks to dApps and further reduce the already limited resources of smart contract developers.

Single Point of Failure

Centralized solutions that automate smart contract functions introduce a single point of failure that makes protocols vulnerable to manipulation and technical failures. Whether these centralized automation solutions rely on scripts running on centralized servers or DevOps teams manually monitoring conditions and calling on-chain contracts, these practices introduce a central point of failure that can lead to protocol insolvency, trade slippage, and the loss of user funds. Essentially, centralized solutions introduce a trust-reliant element to smart contracts, which completely lacks the security, reliability, and transparency guarantees that smart contracts provide.

Beyond security concerns, inconsistent uptime remains a constant concern for DevOps teams that rely on centralized solutions. For example, centralized cloud providers have gone offline repeatedly, which has resulted in downtime for many dApps reliant on their services. This impacted end-users as they couldn’t interact with applications, ultimately damaging the reputation of many protocols. 

Time-Consuming

Setting up and running centralized automation solutions is a lot more difficult and time-consuming than most think. For example, if you’re building a centralized automation solution with Web2 technologies like cloud-based job schedulers or a cron job smart contract, you’ll need to check every block for transactions, listen for events, account for reorgs in the chain, send alerts when token balances get low, and much more. Not to mention that you’ll also need to handle Remote Procedure Call (RPC) unresponsiveness, which can be especially challenging for multi-chain applications. Furthermore, multi-chain applications may require separate automation architecture for each chain the application is deployed on. 

All this effort drains development time and resources which could otherwise support the implementation of new features that attract more users.

Private Keys Exposed

Securing private keys is mission-critical for smart contract developers. However, when initiating transactions from centralized services, developers risk exposing their private keys. As blockchains ensure that only the private key holder can access funds stored at the corresponding blockchain address, this presents a major risk to the security of a protocol treasury. 

The Issues With Using Public Bounties To Automate Smart Contracts

An alternative to centralized automation systems is to integrate autonomous execution directly into the protocol by offering bounties, a financial reward allotted to the first automation bot to call an on-chain function when certain conditions are met.

Unreliable

Balancing the bounty incentive structure is especially challenging for developers. If you set the bounty too low then it’ll never get called, but if you set it too high you can damage your protocol. 

Public bounties don’t provide protocols with any assurances or commitments that the automation bots will operate consistently, especially when they’re needed most. When there’s extreme market volatility or network congestion, automation bots may fail to operate to avoid paying high gas prices or run out of funds—it’s possible your transactions will not be executed at all. 

This is especially important for DeFi protocols that need to manage liquidations, as a failure in the automation processes can leave them with undercollateralized loans that lead to insolvency and a loss of user funds.

Increased Costs 

Another issue with the approach of offering autonomous bounties is that it increases the running costs of the protocol. dApps pay the bounties (i.e. rewards) from their revenues to whoever calls the function first. This cost then grows as automation bots end up in a winner-takes-all competition and drive priority gas auction (PGA) bidding wars. As automation bots raise the gas price they’re willing to pay in order to get miners to process their transactions first and win the bounty, the overall cost increases, as most jobs include a base cost plus gas fee. 

Ultimately these costs fall on end-users, who have to cover the higher fees. Instead, protocols could use Chainlink Automation to keep more profits within their protocol and treasury.  

Centralized Bot Network 

Over time, competition for public bounties can lead to centralization as well-capitalized actors submit aggressive prices for extended periods, drive away the competition, and corner the market. As fewer automation bots monitor and submit transactions, the reliability available to dApps can diminish dramatically. 

Decentralized Automation: Why Developers Choose Chainlink

Chainlink Automation enables developers to unlock a wide array of use cases thanks to smart contract automation while offering several advantages over the above alternatives.

Enhanced Security

Chainlink nodes perform upkeeps in a trust-minimized manner, giving developers and users confidence that their smart contracts will be executed exactly as intended without the possibility of manipulation by any outside entity. By using decentralized infrastructure, Automation helps ensure that user-defined service agreements are enforced on-chain.

As nodes sign on-chain transactions themselves, automated execution is possible without exposing private keys at any point. This enhances the security of the entire protocol as it removes one of the major risks of centralized automation solutions. 

Decentralization

Automation uses Chainlink’s decentralized oracle network to perform upkeeps, meaning developers can rely on the same Sybil-resistant, tamper-proof nodes that are already responsible for helping secure tens of billions of dollars across DeFi. With multiple Automation nodes per chain and a rotating node selection process providing added redundancy, Automation will continue to remain completely decentralized.

Increased Efficiency

Chainlink Automation has several gas-optimizing features, including a rotating node selection process, which helps prevent PGA bidding wars and lowers the cost for end-users. Automation also saves DevOps teams hundreds of hours of work and increases the efficiency of projects. By simply plugging into Chainlink Automation infrastructure with an Automation-compatible contract and registering an upkeep, developers can rest assured their contract will continue executing when predefined conditions are met. This ultimately leaves more resources available for developing and growing their protocol.

Reliability and Long-Term Sustainability

Chainlink Automation continues to provide decentralized automation in periods of extreme network congestion and high gas prices, and are not subject to the centralized infrastructure outages that see centralized solutions fail. Even when networks are volatile, Automation continues to successfully trigger liquidations and help maintain the solvency of protocols, and provide reliable support for many other use cases. 

Chainlink Automation Provides Critical Decentralized Infrastructure for Building Feature-Rich and Secure Applications 

Security guarantees enforced through decentralization are one of the core benefits of smart contracts. By introducing single points of failure, centralized automation solutions undermine this key benefit: What’s the point of securing millions of dollars on a dApp if it can be manipulated by a single entity? Whether it’s an outright hack or subtle manipulation, these security risks have no place in the core infrastructure of Web3. 

Chainlink Automation enables developers to build dApps with decentralized automation, making it a core piece of Web3 infrastructure. Ultimately, Chainlink Automation is integral to enabling the advanced, fully decentralized, trust-minimized dApps that Web3 communities and end-users have come to expect.

To integrate Automation into your dApp, see how you can get started with Chainlink Automation or explore the docs.