Why do we need a Decentralized Oracle Network?
Decentralized oracles connect smart contracts to any external piece of data in a trustless way . This retrieval of data from the real world is done following the rules of a protocol that incentivizes all nodes to tell the truth and punishes them for lying. Yet, what are some real, tangible use cases for decentralized oracles ? This is a popular question we get from the community, and we want to address it the best way we can. The possibilities for this technology are endless , and it would be naive to say we can list them all: smart contracts will literally be able to feed on any piece of data available online. We’ll explore some of the most common concepts we have faced up to date, leaving the door open for innovators to make these examples seem obvious by defining new frontiers with their work. Let’s get started!
🔮 Prediction Markets
Prediction markets are platforms that allow you to buy and sell ‘shares’ of a certain event’s outcome . The more the public believes something is likely to happen, the cheaper the outcome will be, and vice versa. For prediction markets to work in a fully decentralized way there has to be a mechanism in place to trustlessly assess what the true outcome of an event was . In that outcome validation process is where distributed oracles play a role: you can connect the market’s smart contract to external sources to check on the final result. Then, money can be distributed to the buyers that predicted the outcome correctly.
Crowdfunding is a way for everyone to fund projects and initiatives you might like or support.
A very common approach to crowdfunding is to make it milestone based, so that funds are provided to teams based on when and how they reach certain milestones. Crowdfunding can be easily conducted using smart contracts, as they are an efficient mechanism to allocate funds provided by backers. For smart contracts to know if a milestone has been reached by the team (information that escapes the reach of the contract’s code) a decentralized network of oracles can assure a truthful, secure addressing of the team’s achievements.
Finance is a broad topic, but the uses for a trustless oracle in this field are also quite broad. Accessing the price of any good or asset can’t be done without using a trusted third party: until now.
Who is working on oracles for token prices? We need to have a blend of data to get the right price. Relying on a couple of centralised services is a short-term fix. Long term, we need much more tamper-proof pricing data.
A team’s salary payments based on performance metrics can be automated. For stablecoins which are pegged to the value of some external asset (i.e. USD), there needs to be way to retrieve data about the exchange rate between the two, and a decentralized oracle network like Witnet provides the best incentive system to ensure parties always tell the truth.
When an unexpected event happens (a robbery, a natural disaster…) it is common to have insurance in place to mitigate the risk in the best way possible . For insurance to work properly, parties involved need data about the state of affairs before the unexpected event, as well as afterwards. Was that automatic door locked? Did this company have an encryption system in place? What was the damage of a flood to a certain property? For a smart contract to connect to all these data points from the real world without relying on corruptible intermediaries , a network of distributed oracles must coordinate to retrieve and verify all the necessary data.
Identity is a popular topic in the crypto space . How funds, votes, or non-fungible tokens are tied to their owners is an issue many projects are working hard on solving in a decentralized way. These blockchain based identities will be key for the transparent and secure development of many processes . At the moment, it’s quite easy to vote twice on many blockchain-based vote systems, for example, with the problems that can entail in the short and long term future. Trustless oracles will seamlessly connect smart contracts to the identities of voters, asset owners or medical patients .
Whether we’re talking about a big online Casino or a small group of people making a friendly bet, a final result must be set in order for that bet or gamble to finalize. Who won last night’s NBA game? Or how does a smart contract define “winning”, in the first place? Smart contracts shouldn’t have to rely on central entities (a Casino’s management, a trusted API…) in order to make this call. Instead, they can make a request to a network of anonymous nodes and get the consensus result. Hello p2p platforms!
💡 New Frontiers
As we’ve said before, the possibilities for the technology we’re developing are very broad. From simple things like random number generation to heavier processes like freight management or weather data, a decentralized oracle network is a much needed layer of the trustless future the crypto space is building. What we’re truly excited about at Witnet are the ideas developers, innovators and creators will come up with once this tech is fully available for use. Most of the new things that a decentralized oracle can empower are probably outside the realm of our current imagination, which is precisely what drives us to work hard for current and future developers interested in our protocol.
If you have additional use cases on your mind, which some of you surely do, please speak to us so we can share perspectives that might spark fresh ideas we hadn’t thought of before. And if you truly like what we’re doing and you want to join the team, check out our open positions !
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