Built on three core blockchain pillars: Security, Scalability, and Interoperability.
In the decade-long history of blockchain and distributed ledger technology (DLT), rapid developments have led to consistent advances in the capabilities of decentralized financial platforms. By today’s standards Bitcoin has its limits: it supports value transfer and the storage of metadata within those transfers, but little else. With a block time of 10 minutes and a maximum block size of roughly four megabytes, it is also extremely slow compared to the emergent blockchains of the past few years.
Bitcoin retains its dominant position atop the field of public blockchains, most likely because it was the first one, it is widely adopted because of it and not to say the least because it’s completely decentralized. Bitcoin’s proven security and consistent decentralization have given it a reputation as an ideal asset for value transfer and as a potential “safe haven” or non-correlated asset.
For more complex use cases and features completely different technology stacks were required, and they came in their droves. Ethereum brought smart contracts to the public blockchain space, and the ability to run decentralized applications. Monero and Dash brought private transactions and fungibility. Tezos brought on-chain governance, and Metaverse ETP brought on-chain identity.
Modern blockchains have been extremely successful at deepening and broadening the technology’s potential, adapting with a number of consensus algorithms and governance models, and finding ways to scale faster and improve features like smart contracts and atomic swaps. With that said, blockchains remain distanced to real-world conditions or events.
Most smart contracts are executed with simple “if/then” and “yes/no” conditions. In the case of DeFi, this would look something like “Alice has repaid her loan from Bob, release Alice’s collateral”. Building to more advanced conditions that add utility and ultimately function more practically in the real world requires the adoption of blockchain oracles.
Despite what the name may suggest, oracles as a concept in distributed ledger technology have nothing to do with predicting the future. Instead, they serve as a bridge between blockchains and the real world. Oracles gather data on events and outcomes in the physical world, then translate and submit this data in a language intelligible by querying smart contracts.
One example of oracle integration comes in the form of Augur, a decentralized betting platform where users can gamble on predictions.
These can range from football champions to presidential nominees, or bets on the future price of a specific market pair. Once the expected event concludes, the initial reporter (generally the person who proposed the prediction market) submits the outcome, and other reporters stake their aptly-named Reputation tokens to verify whether or not the outcome is correct. Users can dispute outcomes if they believe the reporters acted in bad faith, again by staking REP tokens.
This is a very straightforward implementation of decentralized oracles, but the potentials stretch much further. Software oracles can translate data taken from APIs, web scrapers and databases to fully automate the process of connecting real-world information to the blockchain.
Hardware oracles can bring considerable advancements to supply chain management, by sensing an RFID tag attached to an incoming shipment and relaying this immediately to the blockchain where a payment is released. In decentralized insurance, oracles can report when payable conditions are met – like when an individual with travel insurance has their flight delayed (as was attempted by AXA’s fizzy experiment), or a house covered with an appropriate policy has burned down.
Market data can be connected on chain and used in smart contracts, as already happens in MakerDAO where oracles report the price of Ethereum to ensure loans maintain sufficient collateral.
Despite their use cases, oracles have been the subject of some controversy and debate. Blockchains and distributed ledgers are often designed to replace traditional industries based on trust. By introducing oracles, the potential for error or dishonesty immediately reemerges and presents a considerable challenge to any system where value is being transferred.
A smart contract or decentralized application can work perfectly, but still result in catastrophe if the source of information it receives is dishonest or compromised. This is known as the oracle problem, although as Alex Tsankov positions it, it is more appropriate to call it a social problem: the smart contract works just fine, it’s the people causing trouble.
For this reason any blockchain wishing to make use of oracles must ensure there are checks and balances among oracles, incentives for data feed providers to act in good faith and financial disincentives for wrongdoing. In the case of Augur, this is achieved by having oracles stake tokens which can be confiscated should they act in bad faith.
MakerDAO addresses the oracle problem by taking a median of data submitted by oracles, and allowing users to trigger an emergency shutdown if they witness a coordinated oracle attack. If managed correctly, the oracle problem can be a surmountable one, and a balance can be struck between a minimum of required trust and the security and protection of highly valuable assets.
If driving the adoption of blockchain technology in everyday life is a desired direction, successful implementations of oracles become of central importance to that goal. A self-isolated technology stack can have its uses, as Bitcoin demonstrates on a daily basis, but one which can interact with and be informed by the physical world will deliver vastly more use cases for society and enterprise.
Metaverse DNA will for instance support KrawlCat generalized oracles to connect real world information onto the blockchain, where it can be used in powerful and scalable decentralized applications. KrawlCat oracles operate on consensus, where the same data is checked by all active oracles and is passed on-chain only when consensus is achieved.
They also algorithmically sort through submitted data to find the “most moderate result”, in a process similar to that of MakerDAO. KrawlCat oracles will be used to facilitate interoperability between the blockchain (Metaverse ETP) and the faster DNA chain, creating a permanent connection so both chains can collate data and benefit from both proven security with ETP, and future-proof performance with DNA.
Oracles will provide enterprise and society at large with a multitude of tools and use cases for mass blockchain adoption, where innovation will lead to enhanced efficiency, cost savings, improved security and wider adoption. In combination with on-chain identity, near-instant transactions and interoperability, Metaverse DNA will allow powerful decentralized applications to make use of oracle-provided data and create an ecosystem that works not only in isolation, but in the real world too.
To stay informed with the latest updates from Metaverse Dualchain Network Architecture (DNA), visit mvsdna.com
Create your free account to unlock your custom reading experience.