The term ‘oracle’ has become quite common in crypto circles around the world in recent years, and with good reason. This is because these novel offerings are designed to connect various blockchain projects with a wide range of off-chain data, allowing for the arrival of many novel use cases.
That said, most traditional oracles face two fundamental issues. Firstly, they require a centralized entity/intermediary to facilitate their access to external data in real time, as a result of which third parties can potentially alter the data provided to them. Second, centralized oracles often have to give up many of the privacy advantages that smart contracts offer, which presents significant risks to the overall security of the system.
A smart contract can be thought of as a program/transaction protocol designed to automatically execute, manage, and record relevant events and actions under the terms of a predefined digital agreement.
Decentralized Oracles Explained
As highlighted above, centralized oracles serve as unique and independent entities that provide data from an external source to a smart contract that operates within an established governance framework. As a result, in most cases, they present a single point of failure that can result in them being corrupted or attacked.
On the other hand, decentralized oracles can be viewed as a group of independent oracles where each node that operates within the network is capable of acting on its own, that is, it has the ability to work alone and retrieve data from an outside source. chain.
Since they do not have any kind of reliance on a “single source of truth”, the overall authenticity and veracity of the data that is supplied to the associated smart contract can be verified with an extremely high degree of efficiency.
To elaborate, most high-quality Decentralized Oracle Networks (DONs) provide their customers with highly specific security features, such as data integrity testing (using cryptographic signatures); data validation modules using multi-layer aggregation (to eliminate downtime related issues); crypto-economic guarantees, as well as other optional features such as zero-knowledge proofs.
From an operational point of view, decentralized oracles are ideal for use within a complex business environment, but they require a high level of financial investment, especially when it comes to setting up the project’s native infrastructure and paying for its general 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 provided to a chain of blocks in particular is “tamper proof”. That said, the question of who actually has the power to authenticate this data is worth investigating.
In fact, this question has been thoroughly explored by many blockchain experts and comes up whenever a digital asset needs to be linked to its physical counterpart.
For example, whenever the transfer of ownership related to a physical product (for example, a necklace) must take place between two people, the smart contract associated with the deal must be provided with data that guarantees the validity of the information provided.
To achieve this, a third party is usually required for verification of events taking place in the real world. And while many projects have sought to alleviate this pain point in recent years, the problem is still quite prevalent today.
Decentralized Oracle Solutions
Link of the chain
One of the most popular oracle networks on the market today, Chainlink is best described as a decentralized network of nodes capable of providing 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 certain predefined conditions are met.
Chainlink’s network is designed to help process real-world data associated with a number of sources ranging from asset prices to sports data, shipping data, and weather data. As a result of its multifaceted utility structure, the platform is currently being used by several prominent DeFi projects such as Aave, Kyber Network, Synthetix, among others.
QED can be thought of 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, the QED oracles use “external collateral” as a link to their smart contract theory, mitigating many systemic risks that might otherwise have come into play.
Additionally, the platform uses a “reliability score” mechanism that determines the capital efficiency of the oracle and weeds out poor performers within the ecosystem. Lastly, QED is built on a blockchain that does not have a single point of failure and does not use a centralized verification system, allowing for a higher level of operational efficiency and overall security.
In a nutshell, Witnet is a Decentralized Oracle Network (DON) that not only connects smart contracts with real-world data sources, but also allows third-party software to collect certain specific information posted by a certain web address at any given time. in its life cycle, that too with verifiable proof.
It is worth mentioning that Witnet comes with a highly developed holistic blockchain as well as a native digital asset that miners have the option of protecting instead of retrieving, certifying and delivering web content.
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