This is a brief introduction to the concept of Hybrid Smart Contracts, as part of the Chainlink guide of the LeoFinance 
Before getting deeper in Hybrid Smart Contracts themselves, I think it's important to talk a little about what is the problems that they try to solve.
Smart contracts are regarded as a very efficient solution for contracts nowadays. Because they run on a Blockchain, they are immutable, easily verifiable and are enforced by code, which completely removes the unfair influence that one of the involved parties usually enjoys on traditional contract systems.
However, being on a Blockchain also brings a limitation to them, as smart contracts can only read data that exists on the Blockchain. To resolve that problem, Oracles were introduced to the crypto ecosystem to translate off-chain to on-chain data.
The issue with that approach is that an oracle is a centralized entity, so it can be made faulty and compromise the very core concept of smart contracts.
And that's exactly why hybrid smart contracts can be a perfect solution, connecting the Blockchain network to a Decentralized Oracle Network (DON)
A hybrid smart contract is an application made of two key components:
Smart contract— A code that runs exclusively on the Blockchain
Decentralized oracle network— A distributed network of oracle nodes that provide information from off-blockchain data sources to on-blockchain smart contracts.
Essentially, what smart hybrid contracts do is combine the best features of each of the environments.
This excerpt from the Chainlink blog is really helpful to understand the distinct roles of on-chain and off-chain components:
On-Chain: Blockchain
Maintain a persistent ledger that provides authoritative custody of users’ assets and interacts with private keys
Execute final settlement by processing irreversible transactions that transfer value between users
Provide dispute resolution and guardrails to secure the proper functioning of the off-chain services performed by a DON
Off-Chain: Decentralized Oracle Network
Fetch, validate, secure, and deliver data from external APIs to smart contracts running on blockchains and Layer-2 solutions
Perform various types of computations for smart contracts running on blockchains and Layer-2 solutions
Relay outputs of smart contract code to other blockchains or external systems
By leveraging all the reliability and scalability of the Blockchain network and integrate off-chain data through a DON, hybrid smart contracts can potentially be applied to many different industries. Some say they can even completely replace the legal system.
Since they are enforced by the Blockchain, there is no need for an external court system, making them a lot cheaper and enabling safe peer-to-peer transactions. Also, they are not influenced by local law systems, which completely eliminates the headache that is navigating different court systems on multinational agreements.
Smart Hybrid Contracts have the potential to be a perfect solution to most, if not all, kinds of transactions in the future and they could even replace the legal system as we know it, making global interactions faster, cheaper and safer.
Chainlink is looking to be the leading team in hybrid smart contracts so if you are interested in building hybrid smart contracts applications, it can be a good place to start.
As stated at the beginning of this post, this is an introductory post to Hybrid Smart Contracts. If you want to delve deeper into the technical aspects of this subject, make sure to visit Chainlink's website for more information.
