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@alexzhaAlex Zha
Global Operations Director for MXC Exchange, one of the largest digital asset exchanges in Asia.
Smart contracts have great potential, even if they remain rather limited in approach. Obtaining external data is impossible for a contract alone. The future will inevitably involve decentralized oracles, which can serve many different purposes.
The limits of smart contracts
Expanding the use of blockchain technology to create links and agreements between different parties is a logical step in evolution. I firmly believe that smart contracts are the next frontier in this industry, even if they are still in their early stages of development. Currently, smart contracts are mostly used for a handful of use cases, most of which will never grab attention outside the cryptocurrency community.
To change this narrative, smart contracts themselves will have to undergo an evolution. One of their main flaws is the inability to access external information in any capacity. One option to explore comes in the form of blockchain oracles. These systems are widely regarded as fundamental building blocks of the blockchain ecosystem. Being able to obtain outside information and interface with remains a key hurdle to overcome.
It can be argued that blockchain oracles are effectively bridging the gap between a blockchain ecosystem and the outside world. It’s a big step to forge contractual arrangements and acquire the relevant information needed to execute certain conditions. Improving the scope in which smart contracts can operate and thrive will make this technology more attractive and powerful.
Centralization remains a concern
Setting up blockchain oracles can be done in a number of ways. A common approach is to use a centralized solution, although this has a number of risks and drawbacks. Verification of data integrity should never be biased, but with a centralized approach, which is almost impossible to avoid. Tapping into as many reliable data sources as possible, comparing the information and then working out the details is the only path to take.
After all, an oracle is simply a system that queries and authenticates external data sources and relays information. It is not an actual data source, but it must be coded to tap into specific data sources. The more sources, the more reliable the information will be. Whether it is pricing information, completing transactions or updating product inventory, it must be done correctly, safely and without bias.
In my humble opinion, centralized blockchain oracles will have a very short lifespan. We already see dozens of projects exploring decentralized solutions, even though most of them opt for the same provider. This is another aspect of centralization that will always be a concern in this area, even if it is not necessarily necessary.
While I believe Chainlink has the right approach in terms of decentralized blockchain oracles, not everyone should rely on this technology yet. There are other vendors worth exploring in this regard. Cryptocurrency and blockchain want to be taken seriously by the mainstream. To achieve this, we will all have to work together to create a future in which decentralization is the norm rather than an option.
DeFi needs decentralized oracles
The decentralized finance segment has attracted a lot of interest recently. Users want quick access to new launches before hitting platforms like Binance or Coinbase. Several exchanges, such as MXC Exchange and a few others, continue to push the envelope in terms of providing users with exposure to DeFi tokens and mining. At the same time, we must all remember that this is only one side of the medallion.
Investing in DeFi assets for speculation only is never the right approach. In my opinion, the focus must be on decentralization as much as possible. This includes DeFi projects that use decentralized blockchain oracles for their unique purposes. Considering how decentralized finance aims to be a more transparent approach to finance, all relevant data that the project accesses must be as decentralized and verifiable as possible.
Finding the right solution is essential
Regardless of how you want to look at the situation, it all comes down to finding effective oracular solutions. Projects exploring this option must find ways to maintain their sovereignty without compromising the overall goal. It may be much more difficult than viewers think. In its current form, there is still no decentralized blockchain oracle that can satisfy every need.
Personally, I think it’s a positive sign. Competition must emerge in this space not only to explore different options, but also to give rise to new and powerful solutions.
Although Chainlink is currently the Oracle solution for most projects, I keep an eye out for space to explore what else is out there. A project, by the name of Razor Network, aims to offer “truly decentralized oracles” A very bold claim to live up to, as there are no second chances to make a good first impression in this industry.
Under the hood, Razor Network leverages network stakers to deliver data to smart contracts. This is an unusual way to get information from multiple different sources. It can also offer an incentive for attendees to keep providing data and remain honest while doing so. The concept of give and take is, in my book, incredibly powerful when it comes to decentralizing anything. People are apparently not interested in doing too many things without being rewarded in some way.
Conclusion
The future certainly looks bright for decentralized blockchain oracles, especially when more competitive services come to market. Much wider access is needed to services focused on decentralized solutions, both at the technology and data level. When these two segments meet in the middle, I strongly expect great things to happen.
For the time being, there aren’t too many decentralized Oracle blockchain providers yet. Hopefully this situation will change in the future. The demand for solutions like these will continue to grow, especially if they prove extremely scalable. It is impossible to predict whether this will be achieved in the coming months or whether it will take years.
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