Modularity and the Necessity of RedStone Oracles
Oracle Technology
RedStone Oracles is not only different but superior to most oracles. It hinges on the idea of modular architecture. First of all, what is an oracle? An oracle is an entity that collects information from data sources and broadcasts it to data consumers, such as platforms (e.g., Blockchains) and protocols (e.g., DeFi Protocols). Blockchain networks and DeFi protocols utilize smart contracts that require specific data for certain functions, and the data must be accurate to maintain equilibrium. A liquid restaking protocol such as Swell employs smart contracts that rely on the price of ETH. This ensures that a user’s funds accurately reflect the price of ETH when staked and reissued as a Liquid Restaking Token, which can be used for additional transactions on the blockchain. Theoretically, an oracle could facilitate unlocking a room by notifying the smart contract that a customer has deposited the required funds. This would trigger a smart contract execution for the room rental.
There are certain protocols that do not rely on oracles. One such protocol is the decentralized exchange (DEX), Uniswap. The prices of tokens are already known on DEXes since they are constantly settled according to supply and demand. In fact, that’s why decentralized exchanges (DEXes) are a primary source of data for oracles.
Monolithic and Modular Architecture
Now that you know what an Oracle is, you might wonder why modular Oracles like RedStone are necessary when we already have Chainlink — the leading industry Oracle. To answer that, I’ll need to explain the concept of modularity, which is predominantly used in conjunction with blockchains. This usage is similar to how modular Oracles operate.
Blockchains like Ethereum used to be monolithic, meaning that all their basic functions, such as execution, settlement, consensus, and data availability, took place on the same chain. However, this approach is costly and slow (poor scalability) because each function triggers transactions that require gas fees for processing and validation on-chain. To tackle the issue of scalability, Ethereum has implemented a modular approach through Rollups. According to Harvard Business Review, “Modularity is a strategy for organizing complex products and processes. It involves breaking a product into subsystems, or modules.” Additional layers, known as Layer 2s, such as Arbitrum and Optimism, increase Ethereum mainnet’s throughput by consolidating (rolling up) large numbers of transactions and submitting them to the mainnet as one or fewer transactions. However, what we currently have with subnets like Arbitrum and Optimism is not considered true modularity. This is because these subnets do not operate as a single entity. For instance, I am unable to access dApps that are exclusively on one chain, and my assets are not on a single chain. In contrast, modular blockchains such as Celestia have designated specific layers for certain functions while maintaining a single ecosystem.
After defining what an oracle, monolithic architecture, and modular architecture are, we can now discuss how RedStone improves the oracle landscape through a modular approach.
Chainlink is a monolithic oracle with basic functionality. Its Oracle network receives and broadcasts data onto blockchains. However, this system has scalability issues (aggregating, storing, broadcasting), as we have discussed with the Ethereum mainnet. All the processes occur in a single network, Chainlink’s decentralized oracle network (DON). This means Chainlink cannot easily support multiple chains due to the high costs of on-chain data storage and limited infrastructure.
In reverse, RedStone Oracles’ architecture is highly scalable due to its modular nature. Arguably, the first layer/module is RedStone’s network of EVM-based oracles that gather and aggregate data from various sources. The nodes transmit this data to RedStone’s Data Distribution Layer (DDL).
The DDL has three additional layers:
- The Data gateway broadcasts data to Data Consumers on-chain, such as an EVM or non-EVM blockchain (Ethereum, FTM, Polygon zkEVM, etc).
- Streamr, like the Data gateway, also broadcasts data to Data Consumers on-chain. However, it has an additional function: it temporarily stores data in anticipation of data consumers.
- Arweave then archives all of this information in its own blockchain-based network designed specifically for data storage instead of keeping it on-chain, which is not scaleable and expensive. It adds extra layers of modularity, similar to RedStone, by allocating specific tasks to specific modules. In fact, Arweave’s founder, Sam Williams, has been quoted as saying that with Arweave, “We took essentially the orchestration of a normal blockchain and sliced it up into different modular components and then made each of those into horizontally scalable subnetworks.”
Note: In one of the integration methods of RedStone, i.e. the RedStone Classic (Push) method, it uses an off-chain relayer to collect and push information from the DDL to the relevant data consumer on-chain. This is arguably another module or layer in RedStone’s modular architecture.
RedStone’s modular architecture is designed to meet the demands of its data consumers while significantly reducing the cost of running and providing Oracle services. This is achieved by dividing functions such as aggregation, holding temporary data, archiving, broadcasting, and relaying into multiple layers or modules. RedStone currently supports over 50 chains and all rollups, 1000+ assets, and 50+ data sources. It is becoming increasingly clear that many projects and protocols are not choosing RedStone arbitrarily but rather out of necessity due to the rapidly evolving blockchain space.
