Why Oracles Will Drive the Next Stage of Evolution in the DeFi Market
2022年8月8日 - 8:55PM
NEWSBTC
In a world of “interests,” it is vital that no one has a monopoly
on truth. Decentralized protocols have grown in popularity as
viable alternatives to traditional centralized systems. People are
recognizing the flaws of centralized authority and adopting open,
decentralized, and trustless systems. However, for decentralized
protocols to truly be open and transparent, there’s a need for an
infrastructure that would help access offline real-time information
in a trustless manner. There is no doubt that we live in a world
where anyone can simply share false information and declare it to
be true. Oracles appear to be the solution to the emerging
decentralized web’s “infrastructure” dilemma. Oracles are essential
blockchain infrastructure that facilitates communication between
the offline and on-chain protocols. Oracles are essential for most
decentralized protocols, particularly Decentralized Finance.
Decentralized Finance (DeFi) protocols rely on Oracle networks for
real-time on-chain data and event-based outcomes because
blockchains have no native way to access data outside of the chains
themselves, and decentralized applications (dApps) such as
insurance products, algorithmic stablecoins, financial derivatives,
and prediction markets, must function smoothly. Oracles gather
real-world data from external sources, such as market prices,
weather data, location data, and currency rates, and place it on
the blockchain, allowing smart contracts to act on it. They can
even provide data from different chains. When a protocol is not
decentralized, oracles are frequently third-party services or
application features that a user interacts with manually. These do
not adhere to the notion of decentralized protocols and are, for
the most part, centralized. Centralized oracles could be readily
controlled and utilized for selfish purposes. The purpose of
blockchain oracles is to provide numerous reliable data sources in
order to achieve complete decentralization. To achieve this,
blockchain oracles combine cryptography and incentives to build
systems that allow different nodes to reach a consensus over shared
data. However, this may result in weakness for decentralized
protocols. Manipulation can occur when utilizing common price-feed
oracle systems, and there have been multiple high-profile
incidents, one of which was when lenders on DeFi platform Compound
were liquidated for US$103 million due to a malicious oracle
exploit. The failures of 3AC, Celsius, and BlockFi all emphasize
the significance of enabling real decentralization as a means of
increasing transparency and trust in the financial system. While
the bear market continues to weigh on cryptos and DeFi alike, a new
course must be charted if DeFi is to survive and prosper. However,
oracles will be one of the most powerful drivers of this evolution.
Band Protocol is one of the Decentralized Oracle protocols paving
the way for the future evolution of the Defi Ecosystem. Band
Protocol provides “community-curated” data sources that dApp
operators can utilize to manage and curate data feeds in order to
address the oracle problem and provide smart contracts with
credible data feeds. Band has received a lot of attention since its
inception in 2018 and is well-known as one of the best
decentralized oracles in the business. Another Oracle protocol
worth mentioning is the QED protocol. QED is the next-generation
decentralized oracle solution for the blockchain sector. 0rigin
created a strong economic model called QED to link various
blockchains, smart contracts, and off-chain data sources. The
Delphi oracle has been live and operational for more than three
years. QED is a battle-tested and proven iteration of the Delphi
oracle. Given that QED is the first Oracle solution to address the
technical and business aspects of Oracle protocols, it has a
distinctive value proposition. In addition, QED has created a
robust economic model that sets it apart from other blockchain
protocols by guaranteeing the accuracy of real-world data on-chain.
Because the QED protocol is blockchain agnostic, it can be scaled
and integrated with any open blockchain. On the business side, QED
has put in place financially sound recourse mechanisms that let
customers use external collateral it has given them in case
systemic risks were to blame. Finally, it’s crucial to remember
that the QED network never uses system tokens as collateral and
instead always uses external collateral. Conclusion Centralization
has resulted in numerous security flaws in current Oracle protocols
and the DeFi ecosystem as a whole. Hackers stole about $1.3 billion
in 2021 due to that flaw. There have also been instances where
“centralized” Oracles resulted in discrepancies in market prices
and data across platforms. We saw the Venus protocol being
exploited by unscrupulous actors, costing 11 million dollars, as
hackers take advantage of Venus’s fluctuating rates. Decentralized
oracle protocols, such as QED networks, are the future of the DeFi
industry and would help investors during the current phase of
excessive market volatility and bear market in the cryptocurrency
space. Photo by Viktor SOLOMONIK on Unsplash
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