Introduction
Oracles in the context of Web3, are third-party services that provide smart contracts with information from the external world outside the blockchain ecosystem. They serve as bridges between blockchains and the outside world. Since smart contracts on the blockchain cannot access real-world data on their own due to the nature of blockchain’s decentralization and security features, they rely on oracles for this purpose.
The information provided by oracles can be anything from price information, temperature, the result of a football match, election results, and more. This information is crucial to trigger smart contracts when certain conditions are met.
For example, a smart contract for a weather insurance policy might need data about whether it rained on a particular day at a certain location. An oracle would be responsible for securely and reliably providing this data to the smart contract.
Types of Oracles
They handle online information, such as temperature, prices, flight statuses, etc. The data comes from online sources, and the software oracle puts it into the blockchain.
These deal with the physical world, such as sensors or barcodes, that can translate real-world data into digital values that can be understood by smart contracts.
These provide the smart contract with data from the external world.
These provide smart contracts the ability to send data to the outside world.
These oracles provide data based on consensus, meaning multiple oracles provide data and the most agreed-upon result is chosen. This can help to avoid single points of failure or manipulation.
We shall be looking at 13 top oracles in web3 in this article. Let’s jump right now:
Chainlink
Chainlink is a decentralized oracle network that aims to bridge the gap between smart contracts on the blockchain and real-world applications. Chainlink was designed to enhance the capabilities of smart contracts by enabling access to real-world data, events, payments, and more without sacrificing the security and reliability guarantees inherent to blockchain technology. Key features include:
- Decentralization: The data it provides to smart contracts is sourced from multiple independent nodes or data providers, reducing the risk of centralized failure or manipulation.
- Security: Chainlink uses a variety of cryptographic techniques such as trusted execution environments and zero-knowledge proofs to ensure that the data provided by oracles is secure and trustworthy.
- Flexibility: Chainlink supports a wide range of data types and sources. It can connect smart contracts with numerous data feeds, web APIs, IoT devices, payment systems, and other blockchains.
- Reputation System: Each oracle is evaluated based on the accuracy of its data, its response time, and other factors. This helps users to select reliable oracles.
- Incentivization: Chainlink uses LINK, an ERC-677 token, to incentivize oracles to provide accurate and timely data. Oracles are rewarded with LINK tokens for their services, and they may be penalized for incorrect or misleading data.
Band Protocol
Band Protocol is a decentralized oracle solution designed to connect real-world data with smart contracts on the blockchain. It’s built on Cosmos and aims to be blockchain-agnostic, meaning it can support a wide range of different blockchains. Key features include:
- Cross-Chain Compatibility: Supports multiple blockchains, not just Ethereum, enabling it to serve a wide range of dApps across different networks.
- Scalability: Utilizes Cosmos’ Tendermint consensus algorithm, which allows for rapid processing of transactions and high scalability.
- Decentralized Data Sources: Multiple independent data providers contribute to each oracle update, enhancing data reliability and reducing centralization risks.
- Data Quality Control: A unique dual-token economic model incentivizes data providers to offer accurate and reliable data.
- Customizable Oracle Scripts: Developers can customize how their dApps interact with oracles, including how data is processed and delivered, providing flexibility to meet specific needs.
Tellor
Tellor is a decentralized oracle system that aims to provide secure and reliable off-chain data for on-chain smart contracts. The platform operates on the Ethereum blockchain and is built around a network of miners who compete to add this data to its network. These miners work to solve a proof-of-work challenge, and the first to solve it gets the right to add the data to the network. Key features include:
- Decentralized and Censorship-Resistant: Tellor is decentralized, operating on Ethereum through smart contracts, and it’s resistant to censorship.
- Proof-of-Work Consensus: Tellor uses a proof-of-work mechanism, with miners competing to solve challenges and place data on-chain.
- Staking Mechanism: Miners must stake Tellor’s native token, TRB, to participate. Dishonest actions can lead to the loss of their stake.
- Data Validation: The first five miners to solve the proof-of-work challenge have their proposed value included in a median value, ensuring multiple data points for validation.
- Dispute Mechanism: If a miner submits a dishonest value, TRB token holders can dispute and vote on the validity of the value.
API3
API3 is a decentralized oracle network that aims to provide reliable, real-world data to smart contracts on various blockchains. The unique aspect of API3 is that it proposes a solution where APIs connect directly to the blockchain without the need for third-party intermediaries, which are typically seen in other oracle solutions. API3 does this through what it calls Airnodes, which are essentially first-party oracles. Key features include:
- Decentralized APIs (dAPIs): Decentralized APIs (dAPIs) are createde by aggregating data from multiple first-party oracles. This data can be trusted as it comes directly from the source and is processed on-chain, reducing points of failure.
- Airnode: The Airnode is API3’s primary component, a fully serverless oracle node that allows API providers to directly interact with smart contracts. This design allows for lower operating costs and a higher degree of decentralization.
- Open Governance: API3 is governed by its community of API3 token holders. They manage the treasury, decide on the allocation of resources, and vote on various governance proposals.
- Insurance: API3 plans to provide a quantifiable security guarantee in the form of on-chain insurance. This means users of the dAPI can be insured against potential failures or inaccuracies of the data feeds.
- Cross-Chain Compatibility: API3 is designed to be blockchain-agnostic, meaning it can support a wide range of different blockchains, not just Ethereum.
Augur
Augur is a decentralized prediction market platform built on the Ethereum blockchain. The platform allows users to create and bet on the outcomes of any event, ranging from sports and elections to cryptocurrency prices and even natural disasters. The core idea behind Augur is to leverage the “wisdom of the crowd” to create a forecasting tool and odds that should, theoretically, be more accurate than any individual prediction. Key features include:
- Decentralization: Augur is fully decentralized, leveraging the Ethereum blockchain to ensure there is no central authority that controls the market creation, betting, or outcome determination.
- Permissionless: Anyone can create a prediction market on any topic on Augur, given that it meets the platform’s guidelines.
- Crowd-Sourced Wisdom: Augur’s main principle is the wisdom of the crowd, where the collective predictions of a large group of people can often be more accurate than a single expert’s opinion.
- REP Tokens: Native REP (Reputation) token are used for reporting and disputing the outcomes of events. REP holders are expected to vote honestly on market outcomes, and dishonest reporting can lead to the loss of REP tokens.
- Versatility: Users are allowed to create binary, categorical, and scalar markets, providing flexibility in the types of prediction markets that can be created.
- Transparent and Trustless: All transactions, including market creation, betting, and outcome resolution, are transparent and executed by smart contracts on the Ethereum blockchain.
DOS Network
DOS Network is a decentralized oracle service network that aims to provide real-world data and computing power to mainstream blockchains. It serves as a bridge between on-chain smart contracts and off-chain networks, ensuring that blockchain-based applications can securely and efficiently access off-chain data feeds. Key features include:
- Decentralized and Secure: DOS Network is a decentralized platform, which means it is not controlled by a single entity. Its network of multiple independent nodes ensures data integrity and security.
- Cross-Chain Compatibility: DOS Network is designed to be blockchain-agnostic. It supports multiple blockchain networks including but not limited to Ethereum, TRON, Binance Smart Chain, and Polkadot. This versatility allows for a broad application of the DOS Network’s services.
- Scalability: DOS Network aims to provide highly scalable oracle services, suitable for the varying needs of different dApps and blockchain platforms.
- Incentive Mechanism: DOS Network has a native token, DOS, which is used to incentivize participants in the network. Node operators are rewarded for providing reliable and timely data.
Witnet
Witnet is a decentralized oracle network protocol that connects smart contracts to the outside world by allowing them to retrieve, aggregate, and deliver data from web services, APIs, other blockchains, and even proprietary databases. It’s designed to give smart contracts on any blockchain the ability to request information from the internet without the need for a centralized party. Key features include:
- Decentralization and Security: It uses a network of nodes (called witnesses) that retrieve data for a request. These nodes are incentivized to deliver accurate and reliable data, and they are selected based on a reputation system.
- Reputation-based System: A reputation system where nodes earn reputation points by completing data requests correctly. The higher a node’s reputation, the more likely it is to be selected to fulfill future data requests.
- Dispute Resolution: The protocol includes a mechanism for resolving disputes over data accuracy. When a request is disputed, a larger set of nodes is selected to resolve the dispute based on their reputation score.
- Witnet-Radon: Witnet uses a language called RADON to define how to retrieve and aggregate data, and how to resolve any disputes that arise during this process.
Provable (formerly Oraclize)
Provable, previously known as Oraclize, is a leading oracle service that provides a highly reliable and scalable data-transport layer enabling blockchain applications to connect with various external data sources. It acts as a bridge between blockchain protocols and the outside world, enabling smart contracts to securely access off-chain data feeds, web APIs, and traditional bank payments. Key features include:
- Decentralization and Security: While Provable itself isn’t fully decentralized, it uses cryptographic techniques to ensure the integrity and trustworthiness of the data delivered to the blockchain.
- Authenticated Data: Provable leverages cryptographic proofs to verify the authenticity of data. It uses technologies such as TLSNotary, Android’s keystore system, or Ledger’s Trusted Execution Environments to prove the data hasn’t been tampered with during transport.
- Multiple Data Sources: Provable can connect to any data source on the internet, allowing smart contracts to communicate with various APIs, databases, and other resources.
- Broad Blockchain Support: Provable supports multiple blockchain protocols, including Ethereum, Bitcoin, EOS, among others, making it a versatile option for various blockchain applications.
- Random Data Source: Provable can provide a reliable source of randomness, crucial for many blockchain applications such as games, lotteries, and more.
Nest Protocol
Nest Protocol is a decentralized oracle that aims to produce a more efficient and transparent pricing mechanism for on-chain assets. It is built on the Ethereum blockchain and primarily used in DeFi applications. The unique aspect of Nest Protocol is its approach to data production. It uses a decentralized price feed through a network of nodes, each of which provides a quotation for the asset, and the on-chain price is generated based on these multiple quotations. Key features include:
- Decentralized Price Feed: The main feature of Nest Protocol is its decentralized price feed. Each Nest Node provides an asset quote, and the on-chain price is derived from these multiple quotations.
- Nest Token: The Nest token (NEST) is used as a governance token, allowing holders to vote on protocol changes, and also as an incentive for quotation providers.
- Open Participation: Anyone can become a Nest Node by staking NEST tokens and providing asset quotations.
- Verifiable and Transparent: All quotations are completely open and transparent, and anyone can verify the quotation history, ensuring the credibility of the price feeds.
Kylin Network
Kylin Network is a cross-chain platform designed to power the data economy on Polkadot. It provides a comprehensive, fully decentralized platform for data sourcing, exchange, analytics, and more. By providing a decentralized data infrastructure, Kylin Network aims to enhance the functionality and development of the decentralized applications (dApps) ecosystem. Key features include:
- Decentralized Data Marketplace: Kylin Network creates a marketplace for various kinds of data, where users can trade and exchange data in a decentralized and secure manner.
- Oracle Node Incentivization: This is achieved through a reward mechanism, ensuring the provision of accurate and reliable data.
- Data Analytics: Also provides powerful tools for data analytics, which can be used to analyze and interpret the vast amounts of data generated in the decentralized ecosystem.
- Kylin Data Oracle: The Kylin Data Oracle is a key component of the network, providing a decentralized platform for the acquisition and verification of real-world data.
- Cross-Chain Interoperability: Built on Polkadot, Kylin Network is designed to be interoperable with various other blockchains, facilitating the free flow of data across different networks.
iExec
iExec is a decentralized marketplace for computing resources and services built on the Ethereum blockchain. It enables individuals and organizations to monetize their computing power, storage, and data by creating a global market for these resources. iExec aims to create a more efficient and democratic computing ecosystem, where users can access and rent computing resources from a network of providers. Key features include:
- Decentralized Cloud Computing: iExec provides a decentralized cloud computing platform that allows users to rent and share computing resources, including processing power, storage, and applications.
- iExec RLC Token: The native token is the RLC (Runs on Lots of Computers) token which is used to pay for computing resources and services within the iExec ecosystem.
- Data Marketplace: This marketplace allows for secure data sharing and access control.
- Worker Pools: iExec organizes computing resources into worker pools, where providers can offer their resources to users. Users can choose from various worker pools based on their requirements and trust levels.
- Confidentiality and Privacy: iExec uses advanced cryptographic techniques, such as Intel SGX (Software Guard Extensions), to ensure the confidentiality and privacy of the data being processed on the platform.
Decentralized Information Asset (DIA)
Decentralized Information Asset (DIA) is an open-source, financial information platform that utilizes blockchain technology to source, validate, and disseminate transparent and reliable financial data and digital assets. DIA aims to become the Wikipedia of financial data by bringing together a community of data analysts, providers, and users in a decentralized manner. Key Features include:
- Decentralized and Open-Source: DIA is built on a decentralized infrastructure and its open-source nature allows for full transparency and community participation in the development and governance of the platform.
- Data Validation: In the DIA ecosystem, data is validated using cryptographic techniques and the consensus of the community, ensuring the data’s reliability and accuracy.
- Incentive Mechanism: DIA employs an incentive mechanism that rewards data providers and analysts for their contributions to the platform. This is primarily done through DIA’s native token.
- Scalability and Flexibility: DIA is designed to support a wide range of financial data, from price feeds and market data of cryptocurrencies to traditional financial instruments.
Umbrella Network
Umbrella Network is a scalable, community-owned, decentralized oracle service on the Ethereum blockchain. It aims to provide secure, cost-efficient, and scalable access to blockchain and off-chain data for a wide range of decentralized applications (dApps) and other blockchain-based services. Key features include:
- Decentralized and Community Owned: Umbrella Network is a decentralized platform governed by the community of token holders. They can vote on key parameters of the system, making the network more democratic.
- Scalability: Umbrella Network uses a technology called Merkle Tree, which allows for batching thousands of data points into a single on-chain transaction. This significantly reduces the cost and makes it more scalable compared to other oracle solutions.
- Robust Data: Umbrella Network provides access to a broad array of data, including data from blockchain, DeFi, traditional financial markets, insurance, weather, and more.
- Incentive Mechanism: Umbrella Network has its own native token, UMB, which is used to incentivize validators and data providers in the network.
Conclusion
The role of oracles in Web3 is a critical component in the advancement, functionality and relevance of the ecosystem. Oracles serve as a bridge between the on-chain and off-chain worlds, allowing smart contracts to interact with real-world data, which is essential for many use cases.
The range of oracle solutions provided by projects such as Chainlink, Band Protocol, API3, and others each offer unique features and approaches to address the oracle problem. These solutions focus on different aspects such as decentralization, security, versatility, cost-efficiency, and cross-chain compatibility.
However, despite the current progress, the oracle space is still facing challenges related to scalability, data manipulation, and consensus mechanisms among others. As the demand for decentralized applications grows, the development of more robust, secure, and efficient oracle systems is crucial. The future of this sector relies on continual innovation and improvement.
Moreover, pricing models vary across different oracle services, which may affect their adoption. Some projects charge based on data type and usage, while others have unique pricing systems. As the market matures, it would be interesting to see if a standard pricing model emerges or if diversity in pricing continues to prevail.
In conclusion, oracles are an indispensable element of the Web3 ecosystem, and their evolution will play a significant role in shaping the future of blockchain technology and decentralized applications. It is not just about the technology, but also about the governance, community participation, and economic models that these oracle projects foster. As we move forward, it is important to not only monitor the technological advancements in this space but also to consider the broader socio-economic impacts that these developments could have on our digital future.
Next Steps
- You can go ahead to try out some of these oracles which you’re yet to try out.
- Further research on the use cases of these oracles and the data provided could also serve as inspiration to developers looking for new challenges.
About the Author
Emiri Udogwu, a licensed medical doctor with a burning passion for technology and gifted with skills for spreading knowledge and propagating ideas. A web3 and frontend developer.
References
- Check out the link to the tools
- Wikipedia - Blockchain Oracle
- Youtube - What is a blockchain Oracle
