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In case you’re new to blockchain, data stored in blockchain cannot be altered, only added to. As this data is added and secured, it forms a chain of blocks of referencing data that are interlinked together cryptographically, and this is where the name comes from. And this is also where the problem appears.
The problem is not obvious to those outside of the blockchain industry and many blockchain developers themselves are not even aware of this problem until they encounter a particular need: blockchain itself is limited in its capabilities since it is unable to connect to data in the outside world. In other words, Oracles are the means in which to connect external, real-world data into blockchain thereby greatly expanding the possibilities of what you can do with the technology.
The problem:
You can’t easily bring external data into the blockchain because it’s a closed-loop system. If you are a developer new to blockchain reading this… surprise! It’s not as simple as creating an API to link your external data to your smart contract… This is a good thing for those who want to keep their data secure. It poses a challenge for those trying to create decentralized apps or smart contracts though.
The solution:
Cross-chain Blockchain Oracles. Oracles are systems of nodes and protocols you can use to connect external data to blockchain or even create communication channels, interoperability, between multiple closed-loop systems.
But not all Oracles are created equal. Current designs of Oracles and necessary cross-chain bridges have led to over $730M stolen due to DeFi Exploits last year (see here, here, here and here). here, here, here and here).
These attack vectors will continue to hamper the market and will be targeted until a secure solution is enabled. This is due to the limitations of current Oracle solutions:
Lack of Transparency
No entity is able to provably examine the precision of price reported by Oracles, leading to undetectable misbehavior.
Price Delay & Deviation
Transfer of asset pricing from off-chain to on-chain can cause small deviations. Time delay from the event until it is placed on the external chain is significant in a dynamic market.
Lack of Accountability
Oracles should be accountable for their actions. Security should be further guaranteed by the base protocol layer.
All existing blockchain Oracle solutions are trying to balance the tradeoff between decentralization, scalability, security, and finality. No one has been able to crack this quadrilemma until Supra (more to be shared soon!). As blockchain developers ourselves, we knew it was critical to bring a better Oracle solution to the market.
We’ll be adding more top questions regularly. If you have any specific questions, please contact us.
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