In a world of “interests,” it is vital that no one has a monopoly on truth.
As viable alternatives to traditional, centralized systems, decentralized protocols are gaining popularity. The flaws in central authority are being recognized and people adopt open, trustless, and decentralized systems. However, for decentralized protocols to truly be open and transparent, there’s a need for an infrastructure that would help access offline real-time information in a trustless manner.
We live in an era where everyone can share false information, and it is true. Oracles appear to be the solution to the emerging decentralized web’s “infrastructure” dilemma. Oracles serve as essential blockchain infrastructure to facilitate communication between on-chain and offline protocols.
For most decentralized protocols (especially Decentralized Finance), Oracles are vital. Decentralized finance (DeFi), protocols depend on Oracle networks to provide real-time data on the blockchain and event-based outcomes. Blockchains do not have a native way of accessing data beyond their chains, so decentralized apps (dApps), such as financial derivatives and insurance, need to function seamlessly.
Oracles pull real-world information from other sources such as weather and market data. They then place that data on the blockchain to allow smart contracts and smart contracts access it. You can also provide data from other chains.
Oracles, which are often third-party applications or services that users interact with by hand when a protocol does not have a decentralized counterpart, can be used to help. They do not follow the concept of decentralized protocol and, in general, are centralized. These oracles can be easily controlled and used for selfish purposes. Blockchain oracles are designed to offer many reliable data sources to enable complete decentralization.
Blockchain oracles, which combine incentives and cryptography to achieve this goal, allow nodes to come to a common consensus on shared data. Decentralized protocols may be vulnerable to this weakness. Common price-feed oracle system manipulation can lead to fraud. There have been many high-profile cases, including the liquidation of US$103m by DeFi Platform Compound lenders due to an exploitable oracle. BlockFi, Celsius and 3AC all highlight the importance of real decentralization to increase transparency and trust within the financial system.
The bear market is still weighing on DeFi and cryptos alike. However, DeFi must chart a new course if it wants to thrive and survive. Oracles, however, will be an important driver of this evolution.
Band Protocol, one of the Decentralized Oracle protocols that will pave the way to the evolution of the Defi Ecosystem’s future is Band Protocol. Band Protocol provides “community-curated” data sources that dApp operators can utilize to manage and curate data feeds in order to address the oracle problem and provide smart contracts with credible data feeds. Band, which was founded in 2018, has been well-respected as one the most decentralized and trusted oracles available.
QED Protocol is also an Oracle protocol worthy of mention. QED, the next generation decentralized Oracle solution for blockchain technology is available. 0rigin has created a robust economic model called QED that links various blockchains, smart contract, and other data sources. Since its inception, the Delphi oracle is operational and available for use. QED is an iteration that has been proven to work in battle and is the best version of the Delphi Oracle.
QED, the Oracle solution for the technical and business issues of Oracle protocols has an unbeatable value proposition. QED is also unique in that it has an economic model which guarantees real-world data accuracy, making it stand out from the other protocols.
QED Protocol is open-source and can easily be integrated with other blockchains. QED’s business-side side has established financial sound recourse mechanisms to allow customers to use the collateral it provided them for systemic risk mitigation. Finally, it’s crucial to remember that the QED network never uses system tokens as collateral and instead always uses external collateral.
Conclusion
Security flaws have resulted from centralization in both the DeFi ecosystem in general and current Oracle protocols. This flaw was responsible for hackers stealing $1.3 billion by 2021. There have also been instances where “centralized” Oracles resulted in discrepancies in market prices and data across platforms. We saw the Venus protocol being exploited by unscrupulous actors, costing 11 million dollars, as hackers take advantage of Venus’s fluctuating rates. QED networks and other decentralized oracle protocol, like QED, represent the future of DeFi and will help investors in this current period of extreme market volatility, bear market, and bear market.
Viktor SOLOMONIK photo on Unsplash