🖲️ Why Oracles are critical to the future of DeFi 📈
Decentralisation has evolved into Web3’s distinguishing feature. Numerous decentralised applications (dApps) can now solve problems in previously unthinkable ways during the web’s earliest stages of existence. Blockchain is the core technology powering dApps by establishing trustless peer-to-peer networks. Sustaining connectivity with the outside world requires blockchains to receive real-time off-chain data.
This requirement is particularly acute in the DeFi segment of the industry, which provides financial solutions to users via decentralised networks. Delivering these services requires relaying real-time data about financial markets and feeding them into networks to trigger smart contracts and initiate settlements. This is where oracles enter the picture.
Oracles are a critical piece of middleware in most DeFi applications, allowing smart contracts to communicate with resources beyond their native blockchain. However, oracles utilisation carries significant risks for decentralised blockchains since they often source information from centralised third parties. For example, a compromised external source could potentially relay false information to the network via oracles. Here, we will take a closer look at this problem and discuss our unique solution.
How do data oracles work?
Oracles interact with smart contracts by continuously relaying off-chain data, indicating accurate value, and determining who receives what in the network. Seamless transitioning from Web2 to Web3 depends on the interoperability of dApps, and their ability to access traditional market data residing on Web2 ecosystems. For P2P networks, this means greater interconnectedness and full cross-chain composability across various ecosystems. Enabling blockchains to communicate relies partly on the development and improved complexities of data oracles.
Notable oracle use-cases
Web3’s explosive pace make oracles increasingly crucial to the ecosystem. Finance, weather, and sports represent three core areas where oracles provide vital information to networks. Here are some notable oracle use-cases besides price feeds.
· Prediction markets — Oracles enable users to predict sports, weather, and more events and get an instant settlement.
· Supply chains — They also allow companies to respond more efficiently to changing climatic or environmental factors affecting their supply chains.
· Dynamic NFTs — Oracles power the creation of Non-Fungible Tokens (NFTs) that mirror the performance levels of teams and athletes over time.
Evolving from data acquisition to off-chain compute
Increasingly, oracles are moving beyond their traditional data acquisition roles for blockchains and enabling novel solutions to significant on-chain challenges such as fair transaction ordering, intelligent automation, and access to randomness, making chains more secure and MEV-resistant. While these solutions remain in their infancy, the development of scalable compute chains like our Cudo Compute will accelerate oracle complexity and improvements. However, the fundamental challenge of oracle security remains a critical problem for blockchains, and their increased range of complexity only amplifies that problem. Our solution? Decentralised oracles.
Realising oracle decentralisation
Cudo Compute represents a scalable infrastructure network built on globally distributed and interconnected nodes with a distinct Validator set. This means that oracles built on our unique infrastructure can benefit from the compute layer security architecture in the future. This would provide added scrutiny of external data and the verification of data fed into the network, empowering more robust and secure blockchains. In addition, our decentralised oracles network will also provide a critical security layer for the broader Cosmos ecosystem and beyond via IBC integration.
Join us today
Everyone stands to gain from a more accurate and broader range of oracle data as well as secure off-chain compute. You can support our drive by joining our compute test period and be rewarded with free computing resources. If you wish to sell compute, you can also join in and test your readiness to sell when we go live.
If you are a developer or want to be a validator on our network, you can also get involved right away by following the links below:
And most importantly, if you are a token holder, please make sure you know how to migrate your tokens!
Cudos is powering the metaverse bringing together DeFi, NFTs, and gaming experiences to realise the vision of a decentralised Web 3.0, enabling all users to benefit from the growth of the network. We’re an interoperable, open platform launchpad that will provide the infrastructure required to meet the 1000x higher computing needs for the creation of fully immersive, gamified digital realities. Cudos is a Layer 1 blockchain and Layer 2 community-governed compute network, designed to ensure decentralised, permissionless access to high-performance computing at scale. Our native utility token CUDOS is the lifeblood of our network and offers an attractive annual yield and liquidity for stakers and holders.
Originally published at https://www.cudos.org.