A New Method of Incentivizing Accurate Blockchain Oracles

Blockchain oracles are slowly becoming commonplace. In the same way, the popularity of the internet eventually necessitated the need to own a modem, so has the popularity of Defi and blockchain necessitated the need for oracles. Before diving into the realms of how oracles work and why they are important, it is important to understand the current data issues.

The Increasing Demand For Blockchain Oracles

The problem with smart contracts arises when they depend on real-world data. Unlike the machine world which easily creates links between data, it is much harder to integrate things happening in the real world into the blockchain. To do this projects usually rely on ‘oracles’. Oracles serve the much-needed function of providing off-chain data for on-chain use.

This solution comes with its own issues known collectively as the ‘oracle problem’. Because these smart contracts are dependent on the output from oracles, these oracles must be vetted extensively to ensure that external influence does not become a feature of blockchain so it can maintain true trustlessness.

What QED Offers To The Oracle Problem

The oracle problem is one that has increased in recent times as the need for oracles has risen due to blockchain growth. QED is an Oracle protocol that hopes to have found the solution to it. Most oracles despite their best efforts do have some flaws.

One such flaw is that many of them are not as efficient when dealing with commercial applications. Different applications require different levels of security and a million-dollar transaction will need far more security than one handling smaller levels of risk. This, along with the possibility of human interference are two primary problems being tackled by the QED protocol.

To combat the problem of commercial viability, QED proposes a collateral-based system where oracles post collateral for transactions upfront with recourse being built into the smart contracts. Using this system, security is bolstered along with the trustworthiness of the oracle. Although this cannot outrightly solve the problem of security and trustworthiness it does at least add recompense in the event that an Oracle-based contract is deemed faulty.

In tandem with this, QED also tries to avoid the problem of human interference by only working directly with acclaimed oracles. With this, the protocol will only accept information from oracles that are historically reputable which will automatically weed out the less trusted oracles. In the selection of reputable oracles, the human component is also avoided as the entire system is based on a rating that is assigned based on the performance of the oracles.

With the rating being performance and accuracy-based, oracles are incentivized to perform to the best of their ability or risk being muscled out of the market by the more reliable oracles.

One thing that does cast a degree of trustworthiness to QED is the fact that it is based on the DelphiOracle. The DelphiOracle has already been in operation for a few years and is particularly popular on the WAX blockchain where it sees over 1400+ transactions every hour. It is also known for surviving the famous ‘Black Thursday’ crash which brought the crypto and financial markets alike to their knees.

While this does serve to boost its authenticity, oracles will always be a third party to blockchain transactions. Regardless of whatever is done to remedy the problem, it cannot be overlooked that simply introducing a third party(in this case, the oracle) to a blockchain transaction immediately adds a degree of unpredictability to it that cannot always be accounted for. Hence the true test for QED will be in its running and whether it can maintain the amount of trustworthiness required for transactions while also integrating its protocol seamlessly.

Discuss this news on our Telegram Community. Subscribe to us on Google news and do follow us on Twitter @Blockmanity

Did you like the news you just read? Please leave a feedback to help us serve you better

Disclaimer: Blockmanity is a news portal and does not provide any financial advice. Blockmanity's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Blockmanity won't be responsible for any loss of funds.