The term ‘oracle’ has become quite commonly used within crypto circles across the globe in recent years, and rightly so. These new offerings connect different blockchain projects and allow for many unique use cases.
Despite this, traditional oracles face two main issues. Firstly, they require a centralized entity/intermediary to facilitate their access to external, real-time data — as a result of which third parties can potentially alter the data being supplied to it. Secondly, centralized oracles often have to forego many of the privacy advantages put forth by smart contracts, thereby posing major risks to the system’s overall security.
An intelligent contract is a programme/transaction protocol that executes, manages and records relevant events as specified in a digital agreement.
Explained: Decentralized Oracles
As we have already mentioned, centralized Oracles function as a single entity that provides data from an outside source to a smart-contract operating within a specific governance framework. They are susceptible to being corrupted and attacked, so they often have a single point-of-failure.
On the other hand, decentralized oracles can be visualized as a group of independent oracles where each node operating within the network is capable of acting on its own accord — i.e., having the ability to work solo and retrieve data from an off-chain source.
Since they don’t have any sort of dependence on a “single source of truth”, the overall authenticity, and veracity of the data being supplied to the associated smart contract can be verified with an extremely high degree of efficacy.
Decentralized Oracle Networks provide clients with high quality security features, including data integrity proofs that use cryptographic signatures; data validation modules using multilayer aggregation to avoid downtime issues; crypto-economic and other features such zero-knowledgeproofs.
From an operational standpoint, decentralized oracles are ideal for use within a complex business environment but need a high level of financial investment — especially when it comes to setting up the project’s native infrastructure as well as paying for its general upkeep/maintenance.
Issues in oracles, as it stands today
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 insofar that the information being supplied to a particular blockchain is “tamper-proof”. This being said, we should ask who has the ability to authenticate the data.
This question is actually being pondered by many experts in blockchain. It arises when a digital asset needs to be connected to its physical counterpart.
If the ownership transfer for physical commodities (for instance a necklace), has to occur between two persons, then the smart contract that is associated with the deal must contain data to ensure the validity of this information.
A third party usually is required to verify that the events are taking place in real life. Despite many efforts to address this problem in the recent past, it is still a very real issue today.
Oracle decentralized solutions
Chainlink
Chainlink is one of today’s most popular oracle network, and can be described as a distributed network of nodes capable delivering real-time information to its users from outside data sources. The platform’s native smart contract architecture is automated and is able to perform actions as and when certain predefined conditions are satisfied.
Chainlink’s network is designed to help process real-world data associated with a number of feeds ranging from asset prices to sports data to shipping data to weather data. The platform’s multifaceted utilitarian structure is being utilized by many prominent DeFi projects, including Synthetix and Kyber Network.
QED
QED could be described as a futuristic decentralized Oracle that can connect multiple blockchain networks, their smart contracts and external data sources with ease. Operationally speaking, QED Oracles utilize ‘external collateral’ as a bond to their smart contract theory mitigating many systemic risks that may have otherwise entered the fray.
Furthermore, the platform uses a ‘reliability scoring’ mechanism that determines the oracle’s capital efficiency while weeding out any poor performers from within the ecosystem. Lastly, QED has been built atop a blockchain that features no single point of failure and does not make use of a centralized verification system — allowing for a higher level of operational efficacy and overall security.
Witnet
Witnet, which is simply a decentralized Oracle network (DON), connects smart contract to real-world data sources and also allows third party software to collect certain specific information published at a particular web address at any point in its lifecycle. This can be done with verifiable evidence.
Witnet is equipped with both a fully developed and holistic blockchain, as well as native digital assets, which miners may choose to secure instead of retrieving web content, attesting it, or delivering it.