Decentralized Oracles: The Who, What and Why — A Recap on iExec ‘Trusted’ Oracles
iExec, off-chain computing and decentralized oracles. The Oracle Factory V1 beta release. How do they fit together in the bigger picture?
Following some questions from the community, we’d thought we’d take the opportunity to go back over some of the basics. Why is the iExec tech stack perfectly adapted for decentralized oracles? And what is iExec value proposition within the space?
We’ve split this blog post up into several sections for ease of reading, so feel free to skip around based on your interest. And if you like this article and want to see more content like this, share it on social media!
The Beginning:
Let’s start from scratch: what are oracles?
Decentralized Oracles serve as a messenger, transmitting off-chain information to its intended destination on the blockchain.
This previous iExec blog post illustrates why all decentralized applications need decentralized oracles. Put yourself in the shoes of a dev:
“Imagine you’re a developer, inspired by blockchain, first discovering the wonderland of Ethereum. Your next step would be to code a smart contract that solves a real-world problem. To do this, you need to use data from the real world. But wait, there’s one problem: blockchains are totally siloed from the internet! This is where decentralized oracles come in.”
Read more here:
When Did Decentralized Oracles Become Part of The Plan?
One of the main elements outlined in iExec’s 2017 whitepaper was the need for a consensus protocol. From early on we saw the genesis of one of iExec’s most important innovations: ‘PoCo’ or the Proof-of-Contribution consensus protocol. This consensus protocol works by using mechanisms such as staking, as well as consensus nodes, to validate computations that happen off-chain. Then it provides blockchain-level consensus over results of computation once they are brought back on-chain.
This same ‘PoCo’ consensus algorithm is exactly what makes iExec an obvious solution for decentralized oracles, acting as the decentralized block in between the terabytes of valuable data available on the existing web 2, and the new emerging decentralized applications of web3. Using blockchain-level consensus, off-chain information is verified, ready to be used by decentralized applications.
Who Are the Other Players in the Oracle Space:
Chainlink is a behemoth in the oracle space, moving with all the momentum afforded by a company enjoying the first-mover advantage. According to Google, they secure “billions of dollars in value for live apps across several blockchains.” This is reflected in their market cap of $13B at the time of writing and their partnerships with many DeFi products and companies.
Second, at least in terms of market cap, is Band Protocol ($346M). That’s right — Link has a 39x bigger market cap than its nearest competitor. Other notables on the oracle list are API3 and Tellor. Currently, iExec is sitting in the top 5 on CoinGecko’ Market Capitalization ranking for oracle projects.
When we began our foray into oracles, Chainlink had ~95% of the market share of price feeds (an important type of data provided by oracles). Band had a small remainder of the market, and Tellor even less. This is a simple truth, but it bears repeating because sometimes the most simple things need to be said — if we’re early to blockchain, then we’re really, really early to oracles. Being in the nascent stages means oracles offer huge opportunities.
What Does Market Research show?
There’s no single source of truth (so if you’re looking for a multi-million dollar idea, there you go). Instead, we went about it the old-fashioned way: we pieced together the information through good old-fashioned research. We spoke with developers about their experiences. We listened to project podcasts, read articles, deduced adoption facts from price aggregators like CoinGecko, and connected the dots. One of the things we found out was that many applications that are looking for oracles want options.
We know that privacy-enhancing computation is one of the main trends for 2021.The global research firm Gartner recently outlined its top strategic technologies. Both ‘Distributed Computing’ and ‘Privacy-Enhancing Computation’ made it onto the trends list for 2021. iExec is positioned to have the first-mover advantage in this regard.
How Big Are These Opportunities?
Really big. So big that Chainlink proposed 77 use cases for oracles (if you’re interested, feel free to Google it).
But wait, isn’t 77 a big number? Yeah, it is. Oracles are relevant to decentralized finance, insurance, enterprise systems, supply chain, identity, and government (among other things). Each of those industries is a giant in and of itself. So first and foremost, there’s room for multiple oracle providers in the market. Even winning a fraction of oracle pie translates to potentially billions of dollars in value secured. We can sit idly by and wait until others secure these opportunities or we can act. We choose to act.
Second, we wanted to approach oracles by making their creation quick, efficient, and flexible. Doing so could result in the proliferation of the number of oracles. More proliferation = more diversity. More on that in the next section.
What Market Segment Are We Going After?
The market share iExec is pursuing is in exotic data (i.e. non-price data). If the iExec Oracle Factory manages to execute the way it’s intended to execute, it fills a need in the market.
In addition, when it comes to off-chain computing and oracles, the most promising technological innovations are hardware enclaves. With iExec offering the ability to deploy ‘trusted’ oracles using TEE hardware enclave technology. iExec has a unique first-mover advantage. TEE is extremely important for owners of valuable APIs or data (potentially containing confidential data) who wish to monetize these resources through iExec. In the case of monetizing decentralized oracles, it is important the API key is not leaked.
Why Would Anyone Use the iExec Oracle Factory?
Do you know how to create an oracle? If you do, that’s awesome! Not everyone can. iExec aims to make this accessible to anyone and everyone. We can agree that adoption is key to growing out blockchain use and more specifically, the iExec ecosystem. What if you could make oracles so easy to deploy, anyone could do it in five minutes, with no coding background? I’d say this would have the chance to lead to a parabolic influx of oracles.
Herein lies another advantage: more specific oracles can be created. With the Oracle Factory, any oracle can be created from any API. Contrast that with that of our competition, which offers general oracles that are limited to popular data.
How Much Faster Is iExec Oracle Factory Than Your Competition?
According to our research, it can often take 1–2 hours to create an oracle. The Oracle Factory will take 5 minutes. And remember, this is 1–2 hours with a coding background vs. 5 minutes with no background.
Enough Generalities, What the Heck Does ‘Specific Oracles’ Mean?
Here’s a hypothetical: you need specific information, like the temperature of San Diego. You better hope that this topic is “popular” enough so our competition features it. Not popular enough? You’re SOL (nope, not Solana. To any non-native English speakers, this is slang for “not good”). With iExec, you are not limited to what someone else puts out. You can spin this up yourself or use someone else who has spun this up. You know, the very essence of blockchain.
I’m Still Not Convinced… Meet iExec Trusted Oracles!
Fair enough. And what would you say if I told you that in addition to everything we’ve just covered, iExec oracles are ‘trusted’ thanks to TEE (trusted execution environments). We believe this should be the standard in the oracle space.
Remember the introduction, about how an oracle works by taking data from an API and pushing it to the blockchain? Our competition has multiple APIs that work in tandem to figure out which data to push to the blockchain. What happens if in the case of 10 false data feeds and 1 accurate feed? Under this scenario, malicious data can be pushed to the blockchain.
The use of TEEs (trusted execution environments) ensures APIs are protected. This makes our decentralized oracles not only quicker to spin up, but also more secure. The API key is encrypted and only decrypted within a dedicated part of the host machine. In addition, this provides authentication, in that the enclave guarantees confidential execution and that only the correct oracle is triggered. This makes our decentralized oracles more secure.
Check out our interactive demo comparing standard decentralized oracles to trusted decentralized oracles:
We know when it comes to off-chain computing and oracles, the most promising technological innovations are hardware enclaves. With the ability for anyone to deploy a ‘trusted decentralized oracle’ in minutes, the iExec Oracle Factory aims to make this technology accessible to all.
How Are You Marketing This?
iExec is hosting a workshop for developers at the beginning of October to showcase the Oracle Factory, conduct training, and gather feedback. We have been focused on getting the best possible V1 out first. Then we will concentrate our efforts on press exposure, showcasing this to a broader audience. The alternative is having a ton of eyes on a V1 beta-version of the product.
After the release of the Oracle Factory, iExec has various ideas for community events and competitions. We’re planning an event to teach our community about how to use the oracle factory so you’ll be better positioned to use our technology. And we’re in the middle of setting up an AMA so you can ask your pressing questions to the iExec team. Whether you’re a developer or just a follower of iExec, make sure you’re in our social channels for how to get involved.
How Else Can I Help?
Promote iExec on your social media. Like/comment/retweet our tweets. Spread the news of the Oracle Factory, the dev rewards program, and our other efforts. Don’t have social media? It might be time to create one. Of course, we’ll be opening a forum for user feedback, for any and all comments you might have regarding your user experience with the iExec Oracle Factory V1.
Sounds Too Good To Be True, is this Hopium?
Not necessarily. As long as you remember this is V1. That we’re hiring out additional project managers to help build this out. That we’ll have several versions of the Oracle Factory.
What’s Down the Road for the Oracle Factory?
A bridge to take the value from the oracle and push it to other projects. The goal is to be able to reach projects that need “exotic” (see: specific) data feeds.
TL;DR
Oracles are very important components in the blockchain space. There are already established competitors. The market is still very young; the opportunity is huge. iExec Oracle Factory allows anyone to create an oracle in five minutes, without the need for a coding background. This means more ‘trusted’ oracles can be created, our way, with more specific use cases.
Wait, but Why Decentralized Oracles?
Seriously?😉
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