Many DeFi protocols have recently been hacked, most notably the Axie Ronin bridge worth over $600 million, and other bridges dispersed across various chains. Investor confidence in the DeFi market has declined due to this situation, which has been made worse by the severity of the bear market. Massive sell-offs occurred across the board due to the demise of UST, the stablecoin in the Terra ecosystem, and the sharp decline in LUNA, Terra's native token, which also impacted the price of Bitcoin and other important digital assets. Furthermore, investor confidence has been damaged, and there is now less faith in the future of cryptocurrencies due to the bankruptcies of lending organizations and hedge funds like Voyager and 3AC.
Data accuracy must be consistent across protocols during periods of extreme market volatility to prevent bad actors from further destabilizing the space. This article will examine how decentralized oracles increase data resiliency and accuracy.
What are Oracles?
Oracles are protocols in the blockchain sector that enable communication between smart contracts and outside data. Oracles are third-party protocols in the blockchain sector that enable communication between smart contracts and fluence than it would otherwise be. By removing the blockchain's trustless nature, the current state of oracles in the industry effectively invalidates the entire system. Decentralized oracles are more effective and accurate with data than centralized oracles and are less prone to hacking. Decentralized oracles are an effective strategy for securing smart contracts and facilitating easy off-chain data verification.
Oracle Protocols Improving Data Accuracy
QED is the next-generation decentralized oracle solution for the blockchain sector. 0rigin created a strong economic model called QED to link various blockchains, smart contracts, and off-chain data sources. The Delphi oracle has been live and operational for more than three years. QED is a battle-tested and proven iteration of the Delphi oracle.
Given that QED is the first Oracle solution to address the technical and business aspects of Oracle protocols, it has a distinctive value proposition. In addition, QED has created a robust economic model that sets it apart from other blockchain protocols by guaranteeing the accuracy of real-world data on-chain.
Because the QED protocol is blockchain agnostic, it can be scaled and integrated with any open blockchain. On the business side, QED has put in place financially sound recourse mechanisms that let customers use external collateral it has given them in case systemic risks were to blame. Additionally, automated reliability scoring is used by QED to weed out underperforming oracles. QED also uses distributed ledger technology to uphold its commitment to being a decentralized oracle solution. Finally, it's crucial to remember that the QED network never uses system tokens as collateral and instead always uses external collateral.
A node running the Witnet software gains or loses reputation when it satisfies a data request correctly or incorrectly, with correctness determined by a consensus algorithm that examines node responses. Witnet is a reputation-based decentralized oracle network. By going offline or making malicious attempts, nodes that disagree with the consensus lose their reputation, which is shared by the honest nodes. The Witnet protocol randomly selects oracles, also known as "witnesses," to mine and complete data requests based on their reputation score.
To address the oracle problem and give smart contracts reliable data feeds, Band Protocol offers "community-curated" data sources that dApp operators can use to manage and curate data feeds. A cross-chain oracle network called Band Protocol enables decentralized applications (dApps) to incorporate price and event feeds, connecting the digital and physical worlds. Band has garnered a lot of attention since its launch in 2018 and is well-known as one of the top decentralized oracles in the industry.
Due to security flaws in the current Oracle protocols brought on by centralization, hackers could exploit and steal more than $1.3 billion in 2021 alone through oracle and bridge hacks. Additionally, due to the inconsistent oracles, there were many differences between different platforms. This led to the Venus protocol being exploited by bad actors, costing 11 million dollars, as hackers took advantage of Venus's variable prices. Decentralized oracle protocols are the future of the DeFi sector and would support investors during the current period of extreme market volatility in the cryptocurrency space.