From Delphi to Data: Why We Evolved Oracles on the DAPP Network

From prediction markets to peer-to-peer insurance and financial contracts, dApps can now source data in a trustless manner.

LiquidApps
Jun 25 · 5 min read

There were few figures in the ancient world that enjoyed the esteem bestowed upon the Oracle of Delphi. Serving as the mouthpiece of the god Apollo Pythia, the infallible Delphic Oracle, was lavished with gifts and sacrifices from royalty and the wealthy elite alike. From the prophetic proclamations issued by the high priestess of the Temple of Apollo to today’s multi-billion data-as-a-service market, humans have always placed a premium on sourcing high-quality information.

Blockchains have been hugely successful at creating closed digital universes in which all participants share a single source of truth. However, external sources of information from both the wider internet and the real-world are crucial to fully unleashing the potential of smart contract-based applications. Exchange rate information, weather forecasts and the outcome of an election are just a few examples of data sets that need to be accessed and manipulated from within a contract. Just as the prophetic predictions of the Delphic Oracle were a critical component of a well-functioning ancient society, web oracles could upgrade the capabilities of blockchain networks by exposing smart contracts to trustworthy sources of external data.

Oracles — Because Smart Contracts Are Too Confined

“The Oracle Problem” refers to the difficulty of sourcing credible external data for use from within a smart contract. Relying on a single, central source for the information is undesirable, particularly when significant sums of money are at stake or when the truth of a matter includes an element of subjectivity. For example, the BTC/USD spot rate is dependent upon the exchange from which the data was pulled.

Trustworthiness is not the sole concern when accessing information from centralized entities for blockchain use. Hackers could compromise the integrity of the data source and cause significant material damage. In 2013, a tweet sent out by attackers who had managed to infiltrate the Associated Press’s account alleging that President Obama was injured in an explosion caused the stock market to momentarily shed $130 billion.

The Temple of Apollo, Delphi, Greece; Photo by Dan Lundberg on Foter.com / CC BY-SA

Oracle Use Cases on the Blockchain

Trading Algorithms and Derivatives

One such example is the popular sector of stabletokens. While a slew of tokens pegged to the value of the US dollar has been introduced into the markets, stable tokens could peg their value to any other fiat currencies, commodities or real-world assets. A Tesla-pegged token would need a real-time price feed in order to adjust its price accordingly.

Trivia Game

Decentralized Insurance

A peer-to-peer insurance platform housed on the blockchain would enable insured parties to verify reserve ratios and hold their platform of choice accountable. However, these applications would require a trustworthy source of event data in order to trigger a claim action and pay out the insured party. Decentralized flood insurance providers, for example, would need accurate meteorological and nautical information in order to determine if, in fact, there was a flood severe enough to warrant a claim.

Prediction Markets

Supply Chains

Is this flood severe enough to initiate a claim? Oracles play the role of answering this and other questions critical to the functioning of smart contracts.

Power to the Blockchains

From amusing applications such as prediction markets to the more serious business of peer-to-peer insurance and financial contracts, delivering information with a high degree of integrity about events occurring in the outside world is crucial to expanding the capabilities of dApps on the blockchain. DAPP Service Providers (DSPs) could carry the mantle of Delphi into the 4th Industrial Revolution by supplying developers with trustworthy data feeds to power their applications.

Read more about the DAPP Network’s Oracle service here.


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