What is an oracle?

What are Oracles? The Chinese meaning of Oracle is prophet, prophet. The old lady who plays the role of prophet in the movie Matrix is called Oracle.

One of the definitions of an oracle is a person or thing that has absolute authority or can provide guidance in some respect.

As an example, in a small town, there is a man who walks his dog every morning at 9 a.m., rain or shine. Gradually, the townspeople judged the time based on whether the man was walking his dog. If you see him walking his dog on the street, it must be 9:00 in the morning.

To the townspeople, this man is the Oracle (prophet).

So is he a reliable prophet? uncertain. If he gets sick, the dog dies, or a storm hits, it could throw off his 9 a.m. dog walk, which means he's not a reliable predictor.

Gemini co-founder: Young people don't know what a world without the Internet or Bitcoin is like: Gemini co-founder Cameron Winklevoss tweeted this morning that a generation growing up today doesn't know what a world without the Internet or Bitcoin is like. what it looks like. Instead of accepting the centralized world they are inheriting, the crypto generation or "Generation C" will commit to building a new, decentralized world. [2020/7/18]

Source of Prophet

The concept of a prophet, or prophet, comes from ancient Greek mythology. In Greek mythology, a prophet is a bridge that helps people communicate with the gods, obtains the will of the gods through divination, and informs the people on the ground.

News | The Indian version of "Who Wants to Be a Millionaire" program mentioned Libra The host explained to the audience what is cryptocurrency: India's most popular reality show Kaun Banega Crorepati (KBC) According to the program "Who Wants to Be a Millionaire ( Who Wants to Be a Millionaire)” was adapted. A contestant on the show was asked a question about Facebook's Libra cryptocurrency, and host Amitabh Bachchan went on to explain what a cryptocurrency is to millions of viewers. Nischal Shetty, CEO of Wazirx exchange, tweeted after the show, “Due to this reason, millions of Indians now know about cryptocurrencies.” (Bitcoin.com) [2019/9/10]

There are many methods of divination, but the essence is to try to predict the future.

Prophets on the Blockchain - Oracles

News | 'What is Bitcoin' Tops Google Searches This Year: According to Google's 2018 Annual Review of Search Terms, 'What is Bitcoin' topped Google searches, at least in the US, CCN reports. In the last year, searches for bitcoin included general news searches and "how to buy bitcoin." [2018/12/13]

Blockchain technology is a powerful tool for us to track behavior on the chain, but what if we want to bring data off the chain to the chain? For example, how do we let the blockchain know the price of a certain token, the color of the sky, or whether Trump will be re-elected in the US presidential election.

In a situation like this, the blockchain needs a reliable source of information—an oracle.

You may be a little confused, why does the blockchain need to know information such as token prices?

Information such as token prices does not exist naturally on the chain, and this information is critical to the operation of smart contracts on the chain. For example, a smart contract that handles lending needs to determine the borrower's loanable amount based on the latest token price obtained.

Wilson, Sonsini, Goodrich & Rosati Partner: Trying to Determine What's a Security and What's a Commodity Is Distracting the Market: Robert Wilson, Sonsini, Goodrich & Rosemblum said: "Trying to determine what is a security and what is a commodity is a distraction in the market. I think in the long run, we should not worry about the difference between securities and commodities." [2018/3/15]

One might also ask, why not use reliable external sources of information to address all these issues?

Congratulations, you got the point! What sources of information do you consider reliable? Many people will answer: centralized information sources outside the chain. And "centralization" is exactly the problem, "centralization" means a single point of risk, and experience tells us that it is very difficult to maintain long-term reliability and accuracy of centralized information sources.

How to solve the oracle problem?

Several teams are now working on a suitable solution.

Augur is one of the leading players in this field. It is an oracle machine in the prediction market. Augur allows users to vote to determine the true outcome of an event. If someone thinks the result is inconsistent with the facts, it will enter the dispute stage to further confirm the truth. Through this democratic approach, the truth is discovered with the help of the wisdom of the crowd.

Another solution is Chainlink, which aims to create a network of distributed oracles. This network allows smart contracts to access off-chain resources, such as information on other blockchains or standard data sources like website APIs. For example, if there is a blockchain that records stock market data, then other blockchains can obtain stock market data through the oracle service provided by Chainlink.

Security and reliability of the oracle?

Although the oracle machine can provide data, how to ensure the reliability and accuracy of the data is still a challenge.

Synthetix's oracle made a misquote once, quoting 1,000 times the normal price in Korean Won. A trading bot on the platform detected the bug and arbitraged it, earning a 1,000-fold gain, more than $1 billion in an hour.

Coincidentally, the bZx protocol also experienced abnormal quotations from oracle machines. The bZx protocol allows users to conduct margin trading through Fulcrum. This transaction process is not complicated, but Fulcrum needs the data provided by the oracle machine for pricing, so it chose Kyber, a decentralized trading platform. As a trading platform, Kyber should have provided accurate real-time prices for Fulcrum, but compared with centralized trading platforms, Kyber's trading volume is still relatively small and liquidity is insufficient.

And this point was exploited by a user and profited from it.

This user first borrowed a large amount of ETH, deposited part of it on the Fulcrum platform, and then used the remaining money to eat all of Kyber's stablecoin pending orders. Stablecoins on Kyber were affected by this, with prices rising from $1 to $2. Since the Fulcrum platform uses the oracle quotes provided by Kyber, Fulcrum mistakenly believes that the price of the stablecoin is $2. Immediately afterwards, the user withdrew the ether that had been deposited in Fulcrum before, but the price had doubled. After paying off the borrowed ether, he still made a profit of about 600,000 US dollars.

After this incident, the bZx team gave up the oracle service provided by Kyber and chose Chainlink as the oracle instead.

The future of oracles

Although prophets are often seen in historical stories, the oracle machine on the blockchain has only appeared in people's field of vision for a short time, and we don't know enough about it. The existing oracle mechanism still needs to be improved. After the market has learned every lesson of real money, I believe that the future oracle will be more solid and reliable.

It's hard to say what the future oracle machine will look like. It would be great if a prophet told us.

Tags：

OKX Exchange App