{"id":232545,"date":"2022-04-16T21:00:02","date_gmt":"2022-04-16T20:00:02","guid":{"rendered":"https:\/\/cryptoslate.com\/?p=232545"},"modified":"2022-04-16T17:24:04","modified_gmt":"2022-04-16T16:24:04","slug":"demystifying-blockchain-oracles-part-3","status":"publish","type":"post","link":"https:\/\/cryptoslate.com\/demystifying-blockchain-oracles-part-3\/","title":{"rendered":"Demystifying blockchain oracles: Part 3"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Blockchain oracles enable accessing, processing, and transmitting information between the outside world of off-chain data and smart contracts.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While they already represent a crucial piece of the infrastructure that makes DeFi and decentralized applications possible, oracles are likely to become more prominent in the future.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">How are oracle solutions addressing scalability issues and what major developments can be expected in the future?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To answer these questions, <\/span><i><span style=\"font-weight: 400;\">CryptoSlate<\/span><\/i><span style=\"font-weight: 400;\"> talked to some of the prominent experts on the subject\u2013 some of whom are going to meet in Berlin this June at the world\u2019s first technologically agnostic <\/span><a href=\"https:\/\/cryptoslate.com\/trending\/\"><span style=\"font-weight: 400;\">summit<\/span><\/a><span style=\"font-weight: 400;\"> that\u2019s fully focused on oracles.\u00a0<\/span><\/p>\n<h2><strong>Scalability issues<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">Oracles are one of the primary applications at the moment that are struggling with scalability, according to Niklas Kunkel, Oracle Core Unit Facilitator at MakerDAO, who addressed some of the issues surrounding this pervasive and universal challenge.<\/span><\/p>\n<blockquote><p><strong>\u201cTalking exclusively about Ethereum\u2013the trend of gas prices on Ethereum has been increasing exponentially over the past two years, and even though all of the oracle providers have innovated and made their oracles more scalable, the fact of the matter is that gas prices have been increasing at a greater rate than the rate in which the innovators have been able to reduce it,\u201d according to Kunkel, who pointed out that costs are currently extremely high.<\/strong><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">\u201c<\/span><a href=\"https:\/\/cryptoslate.com\/coins\/maker\/\"><span style=\"font-weight: 400;\">Maker<\/span><\/a><span style=\"font-weight: 400;\"> probably spends around $8 million a year just to operate our oracles,\u201d he said, adding that those costs don\u2019t include other related expenses and upkeep, such as research and development, and can be purely attributed to transaction fees on Ethereum.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While describing the scale of the problem, he noted that Maker\u2019s oracle research and development is, among others, focused on reducing those costs. Kunkel clarified<\/span><\/p>\n<blockquote><p>\u201cWe think we can drastically reduce this, especially on Layer 2\u2013on Layer 1, the computation is very very expensive,\u201d<\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">Since they have drastically reduced the costs of computing, Layer 2s provide a very unique opportunity to reduce oracle costs.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Michael Zemrose, Co-founder at <\/span><a href=\"https:\/\/cryptoslate.com\/coins\/tellor\/\"><span style=\"font-weight: 400;\">Tellor<\/span><\/a><span style=\"font-weight: 400;\"> also addressed the costs of putting data on-chain.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Touching on Tellor\u2019s liveness guarantees in times of high gas fees, network congestion and stress, he explained how their decentralized oracle solution is relying on a basic market demand dynamic.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cData reporters have to pay the gas fee to submit the on-chain transaction, and if it\u2019s a high gas fee situation, the user can just add a tip,\u201d he said, pointing out the option to offer extra money incentives if reporters aren\u2019t reporting.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That said, can users rely on oracles to provide the data they need if their needs change?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cThis space is super innovative and fast moving and the types of data that users need is rapidly evolving,\u201d Zemrose noted, arguing that Tellor\u2019s solution was designed to be extremely adaptable.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Flexibility is one of the key features when it comes to building oracles for the long run, he pointed out.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cThe users stipulate the data they need, how they need it, what format they need it in, and we can make it happen\u2013quickly,\u201d he said, arguing it\u2019s not a huge lift for Tellor to build a custom data type for somebody.\u00a0<\/span><\/p>\n<h2><strong>The future of oracles\u00a0<\/strong><\/h2>\n<p><span style=\"font-weight: 400;\">According to Kunkel, who believes that crypto is still very much in the innovation phase, as the industry matures and professionalizes, a much bigger spotlight will be put on risk management. He predicted,<\/span><\/p>\n<blockquote><p>\u201cNot having your crypto application or crypto business dependent on a singular provider is going to become imperative\u2013which means there is a really big opportunity in the oracle business\u2013for multiple players,\u201d<\/p><\/blockquote>\n<p>The definition of what is an oracle and what it can do has drastically expanded during the past year, Kunkel noted. One example is connecting all of the different blockchains together\u2013something that is commonly called \u2018bridges.\u2019<\/p>\n<blockquote><p>\u201cEssentially what is happening when you want to move tokens from one blockchain to another\u2013you lock them up in chainA, some bridge validator attests that they are locked, and sends information to issue tokens on chainB,\u201d he explained.<\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">Semantics aside, a validator is really just an oracle, Kunkel and Zemrose explained.\u00a0\u00a0<\/span><\/p>\n<blockquote><p>\u201cOracles look at data somewhere and attest saying\u2013this data is true, or\u2013I witnessed this. People have been looking at bridges and validators as something separate, but they are really the same thing,\u201d clarified Kunkel.<\/p><\/blockquote>\n<p>According to him, this will become much more prevalent over the next year, as he expects oracles to play a cardinal role in transitioning from what he described as \u201cgoing from trustful bridges to trustless bridges.\u201d<\/p>\n<blockquote><p>Instead of crypto projects and crypto chains running their own bridge\u2013where the team controls the bridge and the team could steal your tokens or not honor your transfer if they wanted to\u2013there\u2019s going to be a big shift to bridges that will be essentially run by the oracle infrastructure,\u201d he explained.<\/p>\n<p>According to Zemrose, an oracle system that can scale to multiple chains will be inevitable in the future, \u201can oracle system that can be deployed everywhere, such that communities themselves on different chains can run it, develop it, participate in it, and customize the tokenomics based on their needs.\u201d<\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">Talking about the role oracles could play in decentralizing bridges, he predicted a similar scenario outlined by Kunkel.<\/span><\/p>\n<blockquote><p>\u201cI can see someone developing a bridge and partnering up with many different oracles to help empower the protocol of the bridge itself,\u201d said Zemrose.<\/p>\n<p>\u201cA decentralized group of completely different oracles could be a really cool way to see bridging happen in the future,\u201d he concluded.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Blockchain oracles enable accessing, processing, and transmitting information between the outside world of off-chain data and smart contracts.\u00a0 While they already represent a crucial piece of the infrastructure that makes DeFi and decentralized applications possible, oracles are likely to become more prominent in the future. How are oracle solutions addressing scalability issues and what major [&hellip;]<\/p>\n","protected":false},"author":699,"featured_media":232553,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[46940,77497,37],"tags":[],"post_folder":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v21.9 (Yoast SEO v21.9.1) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Demystifying blockchain oracles: Part 3<\/title>\n<meta name=\"description\" content=\"MakerDAO\u2019s Niklas Kunkel and Tellor\u2019s Michael Zemrose address oracle scalability issues and discuss the next phase of development.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/cryptoslate.com\/demystifying-blockchain-oracles-part-3\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" 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