The web 3.0 revolution has arrived, with a plethora of Web 3.0 decentralized applications being churned out at an alarming rate. The core of Web 3 is decentralization, and the introduction of blockchain technology plays a critical role in Web 3.0 displacing Web 2. Web 3 is an improvement on Web 2, promoting decentralization and resolving privacy and data leakage issues. Web 3 is built on blockchain technology and requires Oracles to communicate with external data.
Oracles are blockchain industry protocols that allow smart contracts to interact with external data. These are third parties, and involving them in a transaction may expose what was previously a simple transaction to external influence. The current state of Oracles in the blockchain industry effectively invalidates the entire system by removing blockchain’s trustless nature. Furthermore, the existing Oracles lack the infrastructure to support commercial applications on Web 3.0 platforms built on the blockchain. This article will examine the emergence of decentralized Oracles and their impact on securing the data of Web 3.0 applications.
Oracle Protocols in Web 3.0
As appealing as the concept of Web 3.0 as a self-contained, permissionless, and trustless internet model is, it would have no real-world applications if it couldn’t use external, off-chain data, which is where Oracles come in. Nonetheless, the use of Oracles creates a connection to a third party for external data, which hackers can exploit. Furthermore, most Oracle protocols are decentralized in name only, as hackers use their centralized servers to attack decentralized applications that integrate these Oracles on-chain. These exploits have prompted the development of decentralized Oracles, which work similarly to blockchains. They use distributed ledger technology to tighten security and reduce hacks caused by centralized oracle protocols.
The approach of decentralized Oracles has proven to be quite effective in securing smart contracts and enabling seamless off-chain data verification. However, smart contracts cannot access and handle updated information and actual data without Oracles, demonstrating the importance of Oracle protocols in the long-term sustainability of blockchain technology and DeFi, and why Oracle security must be upgraded.
Decentralized Oracles Leading The Narrative For Web 3.0 Applications
QED is a next-generation decentralized oracle solution for the blockchain industry. It connects multiple blockchains, smart contracts, and off-chain data sources. It’s a battle-tested and proven iteration of the Delphi oracle, operational for over 3.5 years. QED was created in response to the problems plaguing the blockchain industry’s oracle protocols.
The QED protocol is blockchain agnostic, which means it can be integrated with and scaled on any public blockchain. On the commercial side, QED has implemented financially dependable recourse mechanisms, allowing clients to use external collateral provided by QED that may have occurred due to systemic risks. To eliminate underperforming Oracles, QED also employs automated reliability scoring.
Witnet is a reputation-based decentralized oracle network: nodes running the Witnet software earn or lose reputation when they fulfill a data request correctly or incorrectly, with correctness defined by a consensus algorithm that analyzes node responses. Nodes that disagree with the consensus lose reputation (by going offline or attempting to be malicious), and the honest nodes share this reputation. If the consensus is a timeout, it is not punished if one node agrees.
Oracles, also known as “witnesses,” are chosen at random by the Witnet protocol to mine and fulfill data requests based on their reputation score. Benevolent Oracles will gain reputation points and are more likely to be assigned tasks that will earn them tokens when completed.
Band protocol offers “community-curated” data sources, allowing dApp operators to participate in data feed management and curation, solving the Oracle problem and providing smart contracts with reliable data feeds. Band Protocol is a cross-chain Oracle network that enables decentralized applications (dApps) to integrate price and event feeds, effectively linking the virtual and real worlds. Since its inception in 2018, Band has attracted a lot of attention and is widely regarded as one of the leading decentralized Oracles in the space.
Decentralized Oracles are the way forward in adopting Web 3.0 applications, mainly because they are backed by blockchain technology. Web 3.0 is without a doubt a potential disruptor of the current state of the internet, Web 2.0. With the help of decentralized Oracles, it can make this a reality.