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Over the past few years, we’ve heard a lot about the importance of decentralized oracles in the context of blockchain. Why have decentralized oracles become almost synonymous with Ethereum applications? What use cases do oracles make possible? And are there any tools that could ease the deployment of decentralized oracles?
Today, blockchain and smart contracts bring a new paradigm to the world. People can now have total trust in the execution of a piece of code. With this, the dream of a world without a central authority becomes a reality, and decentralized applications (Dapps) embody this new shift.
Imagine you’re a developer, inspired by blockchain, first discovering the wonderland of Ethereum. Your next step would be to code a smart contract that solves a real-world problem. To do this, you need to use data from the real world. But wait, there’s one problem: blockchains are totally siloed from the internet! This is where Decentralized Oracles come in.
Decentralized oracles serve as a messenger, transmitting off-chain information to its intended destination on the blockchain. By using blockchain-level consensus, the off-chain information is verified and ready to be used in decentralized applications. Oracles play an important role in blockchain-based architectures.
If you’re building a decentralized application on Ethereum, trying to solve a real-world problem, chances are you’ll need to connect to the real world… Learn more about why we need Decentralized Oracles here:
This is why iExec will release the iExec Oracle Factory, a user interface allowing anyone to create their own oracles from scratch, directly from their browser! In 5 minutes, even without any blockchain knowledge, anyone will be able to deploy a ‘trusted decentralized oracle’. Being able to integrate Intel SGX hardware enclaves as TEE, users can create trusted oracles in minutes (try the interactive demo for iExec ‘Trusted’ Oracles here).
We’ll now look at some industry use cases for decentralized oracles, and how the iExec Oracle Factory can fit into each, with its three types of actors: Oracle Provider, Dapp Developer, and User.
One of the main issues within the insurance industry is transparency. Data inequality is a problem in the insurance business, which occurs when one side in a transaction has more information than the other, creating a situation where one party can take advantage of the other.
The customer buying insurance (policyholder) has a greater knowledge of their own assets’ real value and present condition (personal health, vehicle, property, or other). The insurance company, on the other hand, has little information.
They must depend on the information provided by the policyholder, to establish the risk profile, premiums, and deductibles of the insured. In addition, the policyholder’s claim payments must be approved by the insurance company. The process of approval is slow and manual without any transparency.
An oracle-based blockchain solution will monitor data through an API (the data source for oracles) and transmit required event information for the insurance to the blockchain (for example, flight information for travel insurance).
The blockchain, with the assistance of smart contracts and oracles, verifies whether the events that were previously determined have occurred or not (such as flight delays, flight cancellations, etc). This is achieved through blockchain consensus. Smart contracts will then be able to control the flow depending on event data supplied by oracles (such as when the plane finally took off) that occurred.
Therefore, blockchain with oracles will provide full transparency to the insurance process. People can track status and data at every phase and will get clarity with the process. Similarly, insurance companies can also ensure the user data is genuine. Oracles in insurance also provide a completely trustless automated solution, claims to payment.
A prediction market is a marketplace where predictions are bought and sold. You buy shares in a business on the stock market. In a prediction market, you may choose to buy or sell shares following a real-world event. Prediction markets may assist in the prediction of any measurable event, such as the weather, an election, or economic development.
Mostly, the current prediction market is centralized, lacking diversification in the sources used to create prediction scenarios, and has many other limitations. Prediction markets are segmented and separated by borders, capital restrictions, and government regulation.
Traders and regulators serve as gatekeepers, limiting who has access to the markets and what they may bet their money on. As a result, the forecasting abilities of these markets are severely limited. Fees are charged by centralized prediction markets in the form of trading costs, profit cuts, and withdrawal fees, among other things.
Blockchain technology can decentralize this prediction market. Everyone is invited to trade on any result, anyplace, anytime. In addition, members have the opportunity to set their own market.
Trustless, peer-to-peer prediction markets were once considered to be just a dream. But now, with the development of blockchain technology and cryptocurrency, they are finally becoming a reality.
Advantage: fees are generally low and likely to become non-existent over time.
When we make a wager, we are implicitly trusting the other party to pay us if we win. As a result, when dealing with individuals we don’t know or trust, we avoid betting with them directly and instead choose to do it via an intermediary such as a casino or other gambling services. We anticipate that the law, or perhaps the casino’s reputation, will assist us in enforcing good behavior. The current online or offline gambling portals are not fully transparent and we have to trust them. These portals can be rigged and outcomes might be altered.
Using a decentralized oracle, it can now be safe to wager on random events with a stranger. Dapps, portals, or protocols can be built on top of blockchain for placing decentralized and trustless bets on real-world events. Users can stake money on the outcome of digital dice, cards, or roulette, without need for trust or centralized entities.
These protocols employ a series of oracles to enter the outcome of the event that the bet is based on into the blockchain. The winner will be revealed when a sufficient number of oracles have declared the same outcome for the event. These protocols can be designed to shift the money to one of the players in that situation automatically, thus oracles do not take control of the prize; instead, they choose between two probable outcomes.
A major part of the iExec Adoption Roadmap is to make easy-to-use product interfaces that demonstrate the benefits of decentralized and secure technology. iExec has already released three interactive demo interfaces demonstrating, iExec Decentralized Cloud Computing, iExec Trusted Decentralized Oracles (using TEE), and iExec Confidential Computing with Blockchain. Check them out!
The iExec Oracle Factory will be the first of its kind, option for anyone to create, list, browse and use oracles all from a dedicated web page — from the most advanced blockchain developer to the crypto novice. V1 of the iExec Oracle Factory is expected to be released later in the year. iExec has various ideas for community events and competitions for this, so whether you are a developer or just a follower of iExec, keep an eye out for chances to get involved!
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