Blockchains cannot receive data from the external world on their own. They need some intermediary to fetch data. These intermediaries are called blockchain oracles. But they also pose a problem; many of them lack severely in security. This article will discuss a few blockchain oracles and rank them according to security.
What are Oracles?
Oracles are programs that do only one thing – maintain data inflow into the blockchain smart contracts. Smart contracts need conditions to be satisfied to execute themselves. Oracles help blockchain smart contracts execute by providing data that is dynamic.
For example, consider a football match scheduled for next Friday. In this case, a smart contract needs this data for executing betting results and deciding a winner.
Why are Decentralized Oracles better at security?
Blockchain oracles can be either centralized or decentralized. Decentralized oracles have advantages over their centralized counterparts, such as higher uptime, security, lower costs, etc.
Decentralized oracles are better at security than centralized ones because the system is distributed over a wide geographic location. Even if a few nodes are compromised or are down, the rest can easily keep the system running. Further, each node has its own responsibility of providing correct information and can be punished if any discrepancies occur.
Here is a list of 6 decentralized oracles that can support a better and more secure information system for a blockchain:
Chainlink is the most widely used decentralized protocol. It has its native cryptocurrency called LINK. The oracle has reliable and almost tamperproof input and output data for smart contracts except for one instance in September 2020 when attackers exploited Chainlink to drive up gas prices leading to a loss of over 700 ETH. Chainlink asks interested operators to stake coins to become validator nodes.
QED is a relatively new entrant in the decentralized oracles space. It has never been hacked. Every validator node has to place some stake to be able to provide information to the oracle system. The network performs the slashing of staked coins from nodes if inaccurate information is detected. This practice discourages malicious nodes and enhances information security.
The Band Protocol is a cross-chain decentralized oracle that feeds information into smart contracts by connecting them with live prices and events. One of Band’s advantages is its integration with Google Cloud, which helps it manage data better and be more accessible.
Similar to QED’s slashing of stake in case of wrong information. Witnet uses a reputation system that cuts or adds to the reputation of nodes on providing incorrect or correct information respectively. Nodes that disagree with consensus lose reputation.
The Provable blockchain specializes in providing oracle services for dApps. DApps identify an information flow that they need to secure and integrate Provable into their system. Finally, they are presented with an Audit document that they can review for their satisfaction. This helps them verify data post-facto.
DIA is an open-source oracle system that enables market players to collect securely, supply, and share data. It works as a network of crowd-verified financial data that essentially mimics a blockchain in principle. It provides data that is secure, verifiable and transparent.
This article has mentioned different blockchain oracles that secure information in various ways. Some have inherent features, some boast of never being hacked, and some have a reputation-based system.
The right oracle for your needs depends upon your use. If you are looking at scaling up rapidly, we recommend Chainlink. If your needs are true security, QED is the best alternative. If you are low on budget, we recommend open source systems like DIA. Security has to be a prime concern in any Web3 project because a project is only as good as its security, especially in a faceless environment.