Truth in Smart Contracts Featuring Soravis Srinawakoon from Band Protocol — The DeFi Podcast Episode #3

Hey DeFi’ers, this week’s episode of The DeFi Podcast features Soravis Srinawakoon from Band Protocol. Band Protocol makes real-world information available to smart contracts using community-curated oracles.

In this episode, Kerman interviews Soravis on why smart contracts need oracles, how Band Protocol identifies and integrates oracles into their platform, and the implications of having a trusted protocol for oracles on the development of distributed ledger technology.

Kerman Kohli: 00:00

Hey everyone, welcome to another episode of The DeFi Podcast! Today we have Soravis from Band Protocol. Soravis, can you briefly explain what oracles are and how we can benefit from them in the crypto space?

Soravis Srinawakoon: 00:14

Sure, thanks for having me here. For oracles, I guess the easiest explanation is that an oracle is a service that brings off-chain information, real-world information, to a smart contract and decentralized applications, right? Most people do not understand that smart contracts are actually not that smart. Smart contracts are pieces of code that live on a blockchain or a smart contract platform. It’s just a code.

So essentially, it’s not even aware of any external information as simple as the price of Ethereum in USD, right? It’s not aware of that. Without an oracle, the only way they can get access to that same price would be on a decentralized exchange, for example, which is not fully secure, right? And that’s why it’s difficult for us or anyone to write a good smart contract with real use cases.

For real benefits, it will need an interface with real-world data, whether that be the price of Ethereum or price of stock or location for example. Imagine if you want to build an Uber without a location data; that’s almost impossible, right? And Uber basically uses Google map API. In the decentralized world, smart contracts can not do that and that’s why an oracle is really, really important. And we need them actually as a service to bring, again, all the real-world information to smart contracts so then they can consume those data and use them inside the applications.

Kerman Kohli: 01:43

Sure! Perfect, and how does Band Protocol solve this issue specifically? At a high level, of course.

Soravis Srinawakoon: 01:49

If you think about this data input, you cannot avoid the fact that somebody has to report data on-chain, right. Somebody has to bring that data because my contract is not going to do that by itself. So we don’t want to centralize that because if you centralize the data and put like one particular person doing it, then you’re centralizing your whole application. Right?

So what needs to happen is you need to have a decentralized set of data providers who basically we report the data and bring the data on-chain. Is that same data easily verifiable, right? And this data is easily verifiable. So let’s say probably there’d be three times, right? You and me and the world can agree as to what is the actual truth here. What is the presence you’re doing right now? So we have a bunch of data providers who basically report the data.

In all honesty, I think that this is the most important part. How do we ensure that the data is correct is basically for us, we use the economic incentive so that as a data you need to stake tokens as a collateral. Essentially, stick some money as collateral and then they also have to their reputation. So they don’t provide, they’ll have this help who they are.

So for example, I might get a cab, they might be Bloomberg who stick tokens provided data and in return for that, if they do a good job, right. And there are people who use the data, they need to pay the fee, you know, the did you the data and those few basic go back to the data providers themselves. Great. So let’s say we are, we built that protocol around that ecosystem to incentivize in the most decentralized way, you know, data providers to provide the data on team.

Kerman Kohli: 03:30

Sure. That makes sense. Thanks for that. And then what are some other approaches to articles you’ve seen in the industry?

Soravis Srinawakoon: 03:38

Oracles are a really, really difficult problem, to be honest. Right now, a lot of the current design is quite centralized at the moment. If I pull some oracle design that we see is basically some people, chili pig who’s going to become data providers, right. Any of you, we shouldn’t be [inaudible], you should be paying someone to become data provider. Then you asked centralizing all of that. Right. Cause like a brother cooperate, which is not good. And that’s what happened a lot in the current design. Other than design, I’m more flexible as well. I should lead by example. It’s up to the Oh yeah. Application to pick your own data providers and sign up, pay them directly for the data that they provide. Great. Westlaw and we choose not to go that route because we think that we really need to be a decent, I know, I know that the whole purpose of using smart contract in the first place. So yeah. A lot of process. Many people are to trying to crack it and will be assuming early days.

Kerman Kohli: 04:33

[Inaudible] Of course. No thanks for that. And then what are some of the risks of articles and smart contracts and how can they be [inaudible]

Soravis Srinawakoon: 04:40

Mitigated? Sure, essentially the main risk is somebody supplying the wrong data. If somebody is lying, and this the most important thing that people don’t understand, like, for example, MakerDAO: if the oracle is compromised, somebody feed them that the price of Ethereum is $20, for example, that will force liquidate every single CDP and collapse the whole system. Right? That’s the big, big right. And we compound that with other people, right?

So I guess if you say how to mitigate that; two things. One, you need to ensure that this is decentralized enough, if you’re centralized then you are putting trust in someone, right? And number two, in order to become decentralized, you need to make sure that the cost to attack the system is way higher than the benefit derived from doing so. Right? I mean it’s as simple as that, I mean, Bitcoin miners, right? It’s best to be honest so that is the cool part. There are a lot of projects including us are trying to solve how to engineer this such that the [inaudible] attack is prohibitively expensive.

Kerman Kohli: 05:49

Sure. That makes sense. And then why did you choose to solve this problem in particular out of all the other problems you can choose?

Soravis Srinawakoon: 05:58

To work on? Right? Yeah. This is a tough one. I think. Well let’s go back to the early days, right? We were really fascinated when Ethereum came out in 2015, and that’s when we started tinkering around with smart contracts, right. Tried to build so many applications. Like, you know, the first one was the lottery. You want to be able to play public ball in Thailand. Right? Okay. We tried to do some reward programs. We tried to do some stablecoins.

Every single time we tried to build these applications we ran into the same problems again and again, which is the data problem. Because we think, “Oh, maybe we want to be a lottery.” How do we bring the real results of the lottery inside blockchain in a way that is not easily compromised? It’s a really difficult part and is a common problem across most of the, the dapps.

That’s why we say, “Hey, this is a really, really big problem. Potentially it can accrue a lot of value as well.” Because again, for you to make it expensive to attack, you need the value capture needs to be high cause otherwise it’s really easy to attack, right? It’s just like, you know, proof-of-work, right. If you have too little power then it’s cheap to attack.

So the same thing we were thinking along the same lines and solveing problems and we want to solve this because it can be a lot easier to build decentralized applications. And other people can focus on scalability and privacy and all of that. But we say, “Hey, you know, we don’t data, you can’t build anything reliable, any reliable thing.”

Kerman Kohli: 07:31

Exactly. And how far is Band away from launching and when can people start to see the benefits of what you guys offer?

Soravis Srinawakoon: 07:45

Right. So actually we just launched our mainnet last week so it’s been a tough month on the launchpad with mainnet, you know with, I mean it’s still early days. We also need to reflect quite a lot, but in terms of technology, it’s available for anyone to use. So right now we have the price of Bitcoin and we plan to add more data in there depending on demand and supply, right? So as we keep talking, a lot of projects, a lot of dapp developers, what type of data they need; but at least fundamentally at a protocol level, it’s working.

So if people carry the data, for example, we launched one of the application called Bitswing, which is essentially an easy way to predict if Bitcoin going to go up and down in five minutes. Simple, right? But that, that really needs a real-time price oracle, right? On Bitcoin. You know, to determine the outcome.

So that demonstrates a use case for us and it’s quite easy and fun to play. And when people paid a play it again, they actually paid a query fee as part of the transactions. And those actually go back to the data providers and go back to the token holders who stake. Right. So that’s, that’s a pretty cool way. I mean, obviously, you know, it’s day one and the a money not like mind-blowing $1 million know, but at least fundamentally is a working protocol and fundamentally is generating revenue. That’s really exciting for us.

Kerman Kohli: 09:17

Wow, that’s really cool. Congratulations. Once again.

Soravis Srinawakoon: 09:21

Thank you!

Kerman Kohli:

09:22 Is there anything else that you’d like to tell the audience about yourself or Band Protocol?

Soravis Srinawakoon: 09:28 S

Sure, I think a lot of people question, “Hey, you know, is mass adoption really gonna come as blockchains do alive? Or why are we launching in the bear market?” Because as you know, a lot of people are still, unfortunately, speculating quite a lot in the industry. I think for us, one is the most important things is launching real products and driving toward real adoption, right. We have been really careful in terms of designing our technology, deciding the token economics, you know, how to make sure tokens actually captured the where, lieu of these analyzed networks, which is a really hard problem. Right?

Again, it’s still experimentation, but we are trying our best and that’s why we decided to launch even though it’s really one of the worst bear markets in history. We want to be focused on adoption and if that comes then obviously long term is where value will be created. I think that’s what’s most important for us. And that’s why when we say we tried to build communities, try to reach out to communities in this country, this is something that we emphasize quite a lot and quite unique to our team and that’s why we have live products on Band Protocol despite the Korean market.

Kerman Kohli: 10:46

Sure, perfect! Thanks a lot for your time today and I look forward to seeing you around soon.

Soravis Srinawakoon: 10:53

No, thank you so much! Thank you for having me.