True decentralization can be achieved with Oracles

The condition ‘oracle’ has been used quite widely within crypto circles around the world in recent years, and for good reason. This is because these new offerings are designed to connect various blockchain projects with a wide variety of off-chain data, enabling the advent of many new use cases.

That said, most traditional oracles deal with two core issues. First, they need a centralized entity/intermediary to facilitate their access to external, real-time data, potentially allowing third parties to modify the data provided to them. Second, centralized oracles often have to forgo many of the privacy benefits offered by smart contracts, posing significant risks to the overall security of the system.

A smart contract can be thought of as a program/transaction protocol designed to automatically perform, manage and record relevant events and actions under the terms of a predefined digital agreement.

Decentralized Oracles Explained

As previously emphasized, centralized oracles serve as separate, self-contained entities that supply data from an external source to a smart contract operating within a fixed governance framework. As a result, more often than not, they have a single point of failure that can lead to them being damaged or attacked.

On the other hand, decentralized oracles can be visualized as a group of independent oracles where each node operating within the network is able to act on its own initiative – that is, has the ability to work solo and retrieve data from an outside source.

Because they are in no way dependent on a “single source of truth”, the overall authenticity and veracity of the data delivered to the associated smart contract can be verified with an extremely high degree of effectiveness.

To elaborate, most high-performance Oracle decentralized networks (DONs) provide their customers with very specific security features, such as data integrity proofs (which use cryptographic signatures); data validation modules using multi-layered aggregation (to eliminate downtime-related issues); cryptoeconomic guarantees and other optional features such as zero-knowledge proofs.

From an operational point of view, decentralized oracles are ideal for use in a complex business environment, but they require a high level of financial investment, especially when it comes to setting up the project’s own infrastructure and paying for the general upkeep/maintenance.

The problems with oracles in their current form

While the transparency and decentralization aspect of most oracle-based platforms is quite intriguing, at least on paper, it should be noted that such propositions are only valid to the extent that the information delivered to a particular blockchain is “tamper-proof”. Now that said, is it worth exploring the question of who really has the power to authenticate this data?

In fact, this question has been explored in depth by many blockchain experts and arises when a digital asset needs to be linked to its physical counterpart.

For example, when the transfer of ownership related to a physical item (for example, a necklace) is to take place between two people, the smart contract associated with the deal must be supplied with data that guarantees the validity of the information provided.

Achieving this usually requires a third party to verify events that take place in the real world. And while many projects in recent years have attempted to alleviate this pain point, the problem is still common today.

Decentralized Oracle Solutions

Chain link

One of the most popular oracle networks on the market today, Chain link can best be described as a decentralized network of nodes that can provide its users with a wide range of real-time information from external data sources. The platform’s native smart contract architecture is automated and can perform actions when and when certain predefined conditions are met.

Chainlink’s network is designed to help process real-world data linked to a number of feeds ranging from asset prices to sports data to shipping data to weather data. Due to its versatile utilitarian structure, the platform is currently used by a number of prominent DeFi projects such as Aave, Kyber Network, Synthetix, among others.

QED

QED can be seen as a future-proof decentralized oracle designed to seamlessly connect a large number of blockchain networks and their associated smart contracts with external data sources. Operationally speaking, QED Oracles leverage “external collateral” as a tie to their smart contract theory, mitigating many systemic risks that would otherwise have gone into battle.

In addition, the platform uses a “trust score” mechanism that determines the oracle’s capital efficiency while removing poor performers from the ecosystem. Finally, QED is built on top of a blockchain that has no point of failure and does not use a centralized verification system, enabling a higher level of operational efficiency and overall security.

white net

Easy said, white net is a decentralized oracle network (DON) that not only connects smart contracts to real-world data sources, but also enables third-party software to collect certain, specific information published by a particular web address at some point in its lifecycle, that too with verifiable evidence.

It is worth noting that Witnet comes with a highly developed, holistic blockchain and a native digital asset that gives miners the ability to secure rather than fetch, confirm and deliver web content.

Leave a Comment