Smart contracts have a lot of potential, although they are still quite limited in their approach. Obtaining external data is not possible for a contract per se. The future will inevitably involve decentralized oracles, which can serve many different purposes.
The limits of smart contracts
The expansion of the use of blockchain technology to forge bonds and agreements between different parties is a logical step in the evolution. I firmly believe that smart contracts are the next frontier in this industry, even though they are still in their infancy. Currently, smart contracts are primarily used for a handful of use cases, most of which will never gain attention outside of the cryptocurrency community.
To change that narrative, smart contracts themselves will need to undergo an evolution. One of their main shortcomings is the inability to access external information in any capacity. One option to explore comes in the form of blockchain oracles. These systems are widely considered to be essential building blocks of the blockchain ecosystem. Being able to obtain external information and interact with it remains a major hurdle to overcome.
It can be argued that blockchain oracles effectively bridge the gap between a blockchain ecosystem and the outside world. This is a big step forward in forging contractual agreements and acquiring the relevant information needed to fulfill certain conditions. Improving the scope in which smart contracts can operate and thrive will make this technology more attractive and powerful.
Centralization remains a concern
Setting up blockchain oracles can be done in different ways. A common approach is to use a centralized solution, although this has its own risks and drawbacks. Checking data integrity should never be biased, but with a centralized approach it is almost impossible to avoid. Tapping into as many reliable data sources as possible, comparing the information, and then processing the details is the only way to go.
After all, an oracle is simply a system that queries and authenticates external data sources and relays information. It is not an actual data source, but it must be coded to access specific data sources. The more sources there are, the more reliable the information will be. Whether it’s pricing information, closing deals, or updating product stock, it needs to be done correctly, securely and without bias.
In my humble opinion, centralized blockchain oracles will have a very short lifespan. We are already seeing dozens of projects exploring decentralized solutions, even though most of them go for a single supplier. This is another aspect of centralization that will always be a concern in this industry, although it may not necessarily be necessary.
While I think Chainlink has the right approach in terms of decentralized blockchain oracles, not everyone should rely on this technology yet. There are other providers to explore in this regard. Cryptocurrency and blockchain want to be taken seriously by the general public. To achieve this goal, we will all need to work together to create a future where decentralization is the norm, rather than an option.
DeFi needs decentralized oracles
The decentralized finance segment has garnered a lot of interest lately. Users want quick access to new launches before hitting platforms like Binance or Coinbase. Several exchanges, such as MXC Exchange, and a few others, continue to push the boundaries in terms of providing users with exposure to DeFi tokens and mining. At the same time, we all need to remember that this is only one side of the coin.
Investing in DeFi assets for speculative purposes only is never the right approach. In my opinion, the emphasis should be as much as possible on decentralization. This includes DeFi projects using decentralized blockchain oracles for their unique purposes. Given the way decentralized funding aims to be a more transparent approach to funding, all relevant data to which the project has access should be as decentralized and verifiable as possible.
Finding the right solution is crucial
Whichever way you want to view the situation, it all comes down to finding effective oracle solutions. Projects that explore this option must find ways to maintain their sovereignty without compromising the overall direction. It can be much more difficult than viewers realize. In its current form, there is no decentralized blockchain oracle that can meet all needs at the moment.
Personally, I think this is a positive sign. Competition must emerge in this space not only to explore different options, but also to give birth to new and powerful solutions.
While Chainlink is currently the Oracle solution of choice for most projects, I keep an eye out for the space to explore what else is there. One project, by the name of Razor Network, aims to deliver “truly decentralized oracles” A very bold claim to live up to, as there is no second chance to make a good first impression in this industry.
Under the hood, Razor Network relies on network players to deliver data to smart contracts. This is an unusual way to get information from several different sources. It can also inspire participants to continue to provide data and to remain honest while doing so. The concept of give-and-take is, in my book, incredibly powerful when it comes to decentralizing anything. People don’t seem interested in doing too many things without being rewarded in one way or another.
The future looks bright for decentralized blockchain oracles, especially as more competitive services hit the market. There needs to be much greater access to services focused on decentralized solutions, whether at the technological level or at the data level. When these two segments meet in the middle, I firmly expect great things to happen.
At the moment, there aren’t too many decentralized blockchain oracle providers yet. We hope this situation will change in the future. The demand for solutions like these will continue to grow, especially if they prove to be extremely scalable. It is impossible to predict whether this will be achieved in the coming months or whether it will take years.
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