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Why the Verifiable Random Function (VRF) is Important in DeFi and NFT Development 

Written by: Sara K

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Sara K

Sara is steadily working on cryptocurrency evaluations, news, and fluctuations in digital currency prices. She is guest author associated with many cryptocurrencies admin and contributes as an active guide to readers about recent updates on virtual currencies.

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May 11, 2022

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The DeFi and NFT ecosystems are facing a significant challenge when it comes to integrating randomness in smart contract decisions. As it stands, most of the existing blockchain infrastructures are limited to deterministic inputs and outputs, making it easy for malicious players to manipulate on-chain decisions. To address this issue, some crypto innovators are turning to solutions such as the Verifiable Random Function (VRF).

A VRF is a cryptographic tool that provides a way to verify the correctness of computations performed on its inputs. By using this function, DApp users can be confident that the generated pseudorandom outputs are correct without revealing any information about the associated secret key. This makes VRFs ideal for the development of modern cryptography, particularly in the Decentralized Finance (DeFi) and Non-fungible token (NFT) space. 

“A verifiable random function (VRF) is a public-key pseudorandom function that provides proofs that its outputs were calculated correctly. The owner of the secret key can compute the function value as well as an associated proof for any input value. Everyone else, using the proof and the associated public key (or verification key), can check that this value was indeed calculated correctly, yet this information cannot be used to find the secret key.” explains Wikipedia

The Role of VRF in Smart Contract Ecosystems 

While DeFi and NFTs are gaining popularity as the latest products in the decentralized market ecosystem, the role of the verifiable random function (VRF) is often overlooked in Decentralized Applications (DApp) development. Currently, a majority of DeFi and NFT protocols are yet to integrate any aspect of verifiable randomness, meaning that on-chain gurus can easily predict outcomes to their advantage. 

That should not be the case; the future of decentralized markets needs to be built on a foundation of trustless and transparent interactions. This is why the Verifiable Random Function (VRF) is so important.

VRF enables DeFi market participants to prove that a particular outcome was fairly and randomly selected based on the inputs. It can also be used to select winners in decentralized betting protocols such Lunabets, IDO auctions and random NFT lotteries. 

As far as innovation goes, the Oraichain VRF is one of the leading solutions that DeFi and NFT developers can integrate into their smart contracts.

This AI-oriented blockchain oracle offers support to some of the leading smart contract platforms, including Solana, BSC, Polygon, Ethereum and Avalanche. Oraichain also recently launched its VRF 2.0 service on Fantom to enable Decentralized & Publicly Verifiable Randomness Generation for the network’s DApps. 

“We are delighted to bring Oraichain VRF 2.0 to the Fantom ecosystem. With Oraichain VRF, Fantom developers can access the necessary infrastructure to quickly develop highly scalable and cost-efficient DeFi, NFT, and gaming products augmented by publicly verifiable randomness,” said the Head of Community Relations at Oraichain, Duc. M Tran.

Though some crypto innovators might underestimate the value proposition of the VRF function, it is a crucial component of DeFi and Non-fungible Token (NFT) development. Unlike traditional random number generation methods, which are not verifiably random, VRF uses cryptography to enable anyone to prove that the output of a computation occurs with high probability. 

According to Wikipedia, this makes VRF ideal for use in smart contract applications where trust is required and transparency matters. 

“Unlike traditional digital signature algorithms, VRF outputs can be published publicly without being subject to a preimage attack, even if the verifier knows the public key (but not the proof). This is useful to prevent enumeration of the names/identifiers in a directory which is using a transparency system.” – Wikipedia. 

Wrap Up 

With the DeFi and NFT markets expected to grow rapidly in the coming decade, DApp developers are better off embracing niche solutions such as the VRF function. This will allow for cryptographically guaranteed randomness in both the DeFi and NFT space. By harnessing the VRF technology, developers can create even more exciting new solutions for these markets without worrying about security or trust issues.

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Sara K

Sara is steadily working on cryptocurrency evaluations, news, and fluctuations in digital currency prices. She is guest author associated with many cryptocurrencies admin and contributes as an active guide to readers about recent updates on virtual currencies.

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