Blockchains are base layers through which disruptive applications have been built. There is Ethereum, Tron, and a couple of other smart contracts enabled ledgers like Cosmos where revolutionary inter-operable finance apps continue to gather pace. With the proliferation of open finance apps called DeFi, there is a demand for quality off-chain data for smart contracts activation.
Smart contracts, as they are, are only active and useful if based on live on-chain data. Outside their open blockchain, smart contracts can’t guarantee reliability. These data can be freely queried and available for public analysis. However, for expanded use and functionality, external or third-party data must be sourced through a trusted channel, a portal. Enabling these are oracles.
What is an Oracle?
An oracle is nothing more than a port linking/bridging real-world data with smart contracts. Since smart contracts are autonomous, activating on conditions whose parameters are drawn from trusted, off-chain data channels, that is oracles, they are vulnerable to malicious attackers bent on manipulating off-chain streams for their advantage. DeFi dapps have already lost millions of dollars due to oracle weakness.
While finance dapps based on Ethereum and other smart contract-enabled platforms require external data sourced from oracles for full operation, there is the need of guaranteeing quality and immutability.
This can be achieved through various means including by diversifying data providers to prevent a collision, increasing economic incentives for validators, porting on-demand data as price feeds for example so that they can be quickly queried without lags, building dapps on a highly scalable blockchain platform, or covering all loopholes by shifting a dapp website’s back end to the blockchain tagging with it censorship resistant features.
Censorship Resistant Dapp Websites
The latter is a choice that virtually all dapps can choose for an all-rounded security. Some of these domains are offered by the Unstoppable Domains.
Instead of relying on domain registry providers like GoDaddy or web-hosting providers such as Google or Amazon Web Services, “.crypto” domains are highly reliable, secure, and robust, maintaining their full functionality as long as the Ethereum blockchain is operational.
Brad Kam, the co-founder of Unstoppable Domains, in an interview highlighted the single point of failure of most dapps:
“And this is basically a problem that DApps have, in general, where the value proposition for them is that they’re censorship-resistant. But then they have this problem where they have a domain name that can be taken away or a Web site can be taken down. And it’s difficult to then have other people build infrastructure on top of them if they have this very simple point of failure that can happen at any time.”
Ultimately, in the face of regulator crackdowns, the site’s censorship resistance ability will always be a big attraction especially for betting platforms that rely on external data from trusted cryptocurrency platforms and an easy-to-use user interface for client onboarding.
For example, all bets on Alpha Play platform are based on the transparent blockchain and their payment obligation is autonomously determined by smart contracts. They have a simple interface where users are betting between $1 and $500 on the moves of two crypto coins and doubling bets, if users’ bets win, in just 5 minutes. Those who want to try out the platform can bet using the $1,000 demo money.
The biggest winner has so far received $1,986. However, the total win is $4,080 and generated from players who punt on real-time crypto rates sourced from Binance. Six percent of commission fees which form the Alpha Play’s turnover is distributed to the token holders as bonuses via the loyalty program while the other ninety percent users are winning as prizes. The remaining four percent is rewarded for active users through a recommendation program. The Alpha ERC20 can be bought on the token sale until August 8, 2020.
Given what’s at stake, not only must the site remain censorship-resistant since financial betting is popular in the western world despite the current ban in the US but the source of data must remain trusted and reliable at all times.
The Quest for Independence, Quality, And Reliability
All indicators reveal that we are in the early stages of a financial disruption where decentralization and security will easily quash centralization, third-party control, and exploitation.
The quest for reliability, quality, and trust for activation of DeFi smart contracts will spur the next wave of innovation where smart contracts will expand possibilities. Here, oracles will play a core role and it is expected that more complex solutions will be forwarded to enhance decentralization and further bulwark oracles’ base layers.