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How Decentralized Oracles And Smart Contracts Will Shape Web 3.0

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Photo by Mourizal Zativa on Unsplash

The DeFi market cap is approximately $64 billion, according to CoinMarketCap, a leading crypto data aggregator. The introduction of smart contracts was a significant factor in the rapid growth of the DeFi industry. Smart contracts are computer programs that operate on a blockchain and automate a series of transactions when certain conditions are met. As a result, smart contracts contribute to the blockchain industry’s complete decentralization by allowing transactions to occur automatically and without the intervention of a third party. Smart contracts can also be used for record keeping, transaction settlement, clinical trials, supply chain implementation, real estate sales, and governance.

As appealing as the concept of blockchain as a self-contained, permissionless, and trustless system is, it would be useless if it couldn’t use external, off-chain data, which is where oracles come in. In this article, we will look at how decentralized oracles intend to shape Web 3.0 and advance blockchain technology adoption.

What exactly are decentralized oracles?

Oracles are blockchain industry protocols that allow smart contracts to interact with external data. Oracles are third parties, and involving them in a transaction may expose what was previously a simple transaction to external influence. By removing the blockchain’s trustless nature, the current state of oracles in the blockchain industry effectively invalidates the entire system. In 2021 alone, hackers stole over $1.3 billion through Oracle and bridge hacks, which were caused by security flaws in existing Oracle protocols due to centralization, opening up a central point for hackers to exploit and exploit.

Decentralized oracles, on the other hand, seek to maintain the blockchain’s trustlessness. Decentralized oracle protocols employ distributed ledger technology to improve security and reduce hacks caused by centralized oracle protocols. Decentralized oracles have proven to be very effective in securing smart contracts and enabling seamless off-chain data verification.

Web3 Decentralized Oracle Protocols

QED Network is an example of a web3 decentralized oracle protocol. Referred to as the next-generation decentralized oracle solution for the blockchain industry. QED is a 0rigin-developed robust economic model that connects multiple blockchains, smart contracts, and off-chain data sources. QED is a tried-and-true iteration of the Delphi Oracle, which has been up and running for over 4 years. QED was created to address the problems that the blockchain industry’s oracle protocols are currently experiencing.

QED offers a distinctive value proposition in that it is the first Oracle solution to address the technical and commercial aspects of Oracle protocols. QED has created a strong economic model that sets it apart from other blockchain protocols by ensuring the accuracy of real-world data on-chain. The QED protocol is blockchain agnostic, which means it can be integrated with and scaled on any public blockchain. On the commercial side, it has implemented financially dependable recourse mechanisms, allowing clients to use external collateral provided by QED that may have occurred as a result of systemic risks. To eliminate underperforming oracles, QED also employs automated reliability scoring. It uses distributed ledger technology to maintain its commitment to being a decentralized oracle solution.

To encourage the use of the QED ecosystem, Oracles in partnership with QED would be given $QED, the native token of the QED oracle solution, as well as an incentive to retain ownership. Smart contracts based on the QED protocol are executed on the UX network, which is both fast and scalable. QED’s novel approach to the decentralized Oracle sector has positioned it as the ideal solution to the sector’s shortcomings.

Another example is Witnet, which is a reputation-based decentralized oracle network: nodes running the Witnet software earn or lose reputation when they correctly or incorrectly fulfill a data request, with correctness defined by a consensus algorithm that analyzes node responses. Nodes that disagree with the consensus lose reputation (either by going offline or attempting to be malicious), and honest nodes share this reputation. The Witnet protocol selects Oracles, also known as “witnesses,” randomly to mine and fulfill data requests based on their reputation score.

Final Thoughts

Decentralized oracles are a breath of fresh air for smart contracts. They aspire to lead the next generation of Oracle protocols that provide services to smart contracts in a fully decentralized, transparent, and open manner.

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  • Source: Plato Data Intelligence: Platodata.ai
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