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Oracles will rule the world in a blockchain-enabled future. There is no denying that Data is King in a world run by smart contracts and seamless execution driven by the information a smart contract receives. In the example of a loan position on a DeFi lending and borrowing protocol like Aave, the loan on chain will be liquidated or not based on the data being fed to the contract.

This article will explore Oracles, a type of smart contract we use here in DeFi to make data useful in the sense that we can have a contract autonomously executed based on a data source. This article is built for the intermediate learner in Crypto/DeFi.

If you’re a user of any blockchain you’re used to seeing wallet and contract addresses. All systems need a way to identify unique items and on all EVM-compatible blockchains, we see these 42-character hexadecimal addresses being used to identify a unique user or contract.

Have you ever noticed those odd-looking crypto addresses that identify users and contracts on blockchains? They're called wallet and contract addresses, and they're typically 42-character hexadecimal strings beginning in 0x that are used to identify unique items on all EVM-compatible blockchains.

But what exactly is an Oracle, you ask? Simply put, it's a smart contract that resides on the blockchain and sends transactions to trigger other smart contracts based on predetermined actions. For example, imagine a DeFi protocol that offers crop insurance to Oaxacan coffee farmers. Users (or DAOs) can buy insurance by sending premiums to the contract, which accumulate until a valid claim is made.

But here's the catch: claims aren't made by the coffee farmers themselves, but rather by autonomous smart contracts. The Oracle governing the contract is programmed to track what would qualify as a loss, and when it detects one, it sends an API call to the insurance contract to pay out the claim. The Oracle could monitor weather patterns in Oaxaca, the Oaxacan coffee market, or even news sources for mention of local coffee market failures. Whenever it detects a trigger event, the Oracle sends the call and the contract does its job. Cool, huh?

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Why decentralized data streams matter**

Decentralized data streams offer increased security, transparency, and reliability compared to centralized sources. They provide an alternative to centralized sources that are susceptible to single points of failure or censorship and enable the development of new and innovative systems.

There are a number of potential issues that can arise with Oracles having centralized governance:

• Single point of failure: If a centralized data API goes down or experiences a technical issue, it can disrupt the entire system and cause widespread issues for users.

• Lack of transparency: Centralized data APIs may not be transparent about how they collect and use data, which can raise concerns about privacy and the security of the data.

• Limited competition: With centralized data APIs, there is often only one provider, which can limit competition and potentially lead to higher prices or less innovation.

• Censorship: If a centralized data API is controlled by a single entity, it may be susceptible to censorship or manipulation of the data.

• Dependence on a single entity: If a centralized data API is the only source of certain data, users may become reliant on a single entity for that data, which can create vulnerabilities in the system.

** **Decentralized data APIs, such as those provided by DIA, aim to address these issues by using a decentralized governance model to provide customized data streams, which can help to improve transparency, security, and reliability. **
** Competition Matters

Competition is healthy in any industry as it drives innovation and helps to ensure that users have a choice of high-quality products and services. The decentralized oracle space is no exception and having multiple protocols working on different and same issues benefit users and the overall ecosystem’s access to reliable and transparent data.

Chainlink is a well-established player in the decentralized oracle space, and it has achieved significant adoption and growth. However, builders, users, and investors alike should not discount a competitor specifically focused on custom data feeds, the types you need to see NFTFi, Derivative Markets, and Liquid Staking protocols succeed.

Of course, DIA would be considered one such competitor. A few reasons one might choose to build with DIA include:

• Data focus: DIA is focused specifically on providing high-quality financial and market data to decentralized finance (DeFi) and other applications, whereas Chainlink provides a more general-purpose decentralized oracle solution that can be used to access a wide range of data types and external systems.

• Security: DIA uses a unique proof-of-stake and proof-of-custody model to secure its data and oracle nodes, which may be seen as more secure than Chainlink's proof-of-reserve model.

• Transparency: DIA is more transparent than other decentralized oracle solutions, with all data sources and oracle nodes being publicly listed and verifiable.

• Customization: DIA allows users to customize their data feeds and oracle nodes to suit their specific needs, which is more flexible than the options available on Chainlink.

Obviously, we can see how data is king. This example of three players, the 0xContract, 0xUser, and 0xOracle will be the happy triad of most all blockchain interactions. Almost everything will be affected by the quality of these three players acting with integrity.

If we’ve learned anything in this crypto downturn it's that when Integrity is key, decentralization matters. Most all examples of trust being broken in the space of blockchain, it is trust that is broken via some centralized entity's blunder. For example, in the case of FTX users deposited their funds and later were unable to withdraw them after the centralized entity, FTX, simply used users’ funds and then lost them in a breach of customer trust. 

Meanwhile, it was the decentralized trading desks and apps built on decentralized networks that stayed true to their user's best interests.

I believe we’ll see similar things happen in the data space; a bad actor could have a major incentive to feed false or misleading data to a contract. Esepcially with the rise of Liquid Staking Dirivatives and NFTFi.

This means that the time is now to talk about decentralized ownership of our data streams, and it's time to customize these data streams so that accurate and contextual information is being streamed to the smart contracts that will rule our lives. ** **

Oracles are smart contracts that can be used to execute actions based on external data. They are particularly useful in decentralized finance (DeFi) applications, where they can be used to trigger actions based on data such as stock prices, weather data, and other off-chain events. Decentralized oracle networks, such as DIA and Chainlink, provide decentralized and secure access to external data for smart contracts. DIA is focused specifically on providing high-quality financial and market data and offers increased security, transparency, and reliability compared to more centralized sources. Competition in the decentralized oracle space can drive innovation and usher in the future of NFTFi, Derivative Markets, and Liquid Staking Derivatives. Ultimately, using decentralized oracles can help bring about all of the real-world things we want in Web3.

Real-world things - Smart contracts autonomously triggering everything from Insurance claims with no paperwork to syncing up the world’s supply chains. The  “Finer Things” as I call them, with fast, secure, and reliable data driving it all. We will onboard the world into a Web3 future. ** **