Present and Future of Oracle Market: Interview with Angus Tookey

The market for Oracle services on blockchains is growing rapidly alongside the crypto and blockchain sectors as a whole. Several notable companies are spearheading this expansion. In a recent conversation, we spoke with Angus Tookey from Chronicle Protocol about his perspective on the current state of the market and its potential future developments.

Q: What is the current state of the blockchain Oracle market? 

A: The landscape for blockchain Oracles is really interesting at the moment. You have the obvious leader in the market, Chainlink, who has largely gone unchallenged since 2019. Then you have a number of newer protocols, such as Pyth and Redstone, that are attempting to build the all-important Lindy needed for trust in the security of Oracle protocols, and then there is us at Chronicle, who have Lindy with the protocol being live and battle-tested since 2017 but are just getting started having only opened up for new users outside of MakerDAO for the first time.

The blockchain Oracle market is currently witnessing an intriguing competition between three emerging protocols – Pyth, Redstone, and Chronicle – and the dominant player, Chainlink. It will be thrilling to observe how the market reacts to this intense rivalry.

Q: What are the current requirements/standards for such solutions? What do users expect to get?

In priority, a secure and safe Oracle network is essential, with Lindy’s reputation and market experience playing significant roles. Yet, as markets expand, fresh standards are emerging.

In the past, the dependence on a singular Oracle provider for Decentralized Finance (DeFi) and other users has been quite prolonged. Consequently, the primary concern was generally centered around the question of when an Oracle could be established to accommodate my token or blockchain, and if feasible, what would be the associated cost?

Due to increasing competition from new protocols, users’ expectations have evolved. It’s not just about how fast an Oracle can be established for a new token or blockchain anymore. If one Oracle protocol fails to keep up and takes too long, another will step in to meet the demand.

Depending on whether the user is a dapp or a blockchain, these new requirements are different. The approach of a blockchain foundation is to partner with Oracle protocols to ensure that a broad array of price feeds are available on their chain, therefore encouraging DeFi builders to create or deploy their Dapps there. As a result, cost efficiency (or gas usage) has become a key topic. A $100,000 gas fee grant for one Oracle provider may last 50% longer than if it were awarded to another based on how much gas they consume.

Although cost-efficiency is important for Dapps, there’s growing curiosity about the designs of various Oracle protocols due to their significant differences. This trend is highlighted in a recent report by Chaos Labs. For instance, although Chronicle and Chainlink are Decentralized Oracle Protocols, they differ greatly in terms of transparency and scalability.

Another example is the rise of centralization in new Oracle protocols, whether that is running all validator nodes internally or a dependency on a single piece of infrastructure, such as a crosschain bridge. Users are starting to compare and contrast between Oracle protocols a lot more than they have in the past to understand the benefits and risks, and this is something we encourage.

Q: Are there any unsolved problems in the market? What are the ways to address them?

From the beginning of the blockchain Oracle, there has been a challenge: It’s impossible to enhance its decentralization and thus improve security without simultaneously raising its operational costs (denoted as gas). This predicament is often referred to as the “Oracle issue.”

This tradeoff emanated from the architecture of Oracle networks. All Oracle networks use the same type of cryptography, ECDSA, to validate the integrity of the Oracle-delivered data. Oracle providers are trying to find a way around this problem, the main solution of which is reducing the number of validator nodes attesting to the integrity of the data. This does reduce cost, but also drastically reduces security.

In the context of “push” and “pull” oracle architectures, the challenge of aggregating multiple signatures efficiently has been potentially resolved for “push” through the use of Schnorr signature aggregation as an alternative to ECDSA. However, due to the requirement for quick response times in “pull” oracles, a solution to this issue remains elusive.

Q: What is the future for Oracle services?

Oracles, which play a crucial role behind the scenes in the blockchain world, facilitating daily value transfers worth billions, are currently underutilized beyond price feeds. While price feeds are essential for most Decentralized Finance (DeFi) applications, Oracles have much more to offer.

In essence, Oracles serve as providers of various types of data, including figures and yields. The potential for expansion in these underdeveloped areas is vast.

In the rapidly expanding realm of the RWA sector, we notice significant progress. With Defi’s continuous exploration of integrating off-chain financial instruments like treasury bills onto blockchain platforms, there arises an essential requirement for Oracle infrastructure. These Oracles serve to authenticate various aspects, such as collateral quantities in tokenized products, ensuring the on-chain protocol is aware of the number of off-chain treasury bills, thereby issuing corresponding tokens accordingly. This scenario underscores just one facet of how Oracles act as crucial intermediaries between Defi and RWAs.

In simpler terms, the outlook for Oracle services is promising as the industry moves toward integrating and linking various systems. Oracle is expected to play a crucial role as the connective tissue in this interconnected ecosystem.

Angus, we’re grateful for taking the time for this interview and opening up with your insights. Wishing you great success as you continue with your project, looking forward to more updates soon.

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2024-04-04 15:36