The web 3.0 revolution has arrived, with an avalanche of Web 3.0 decentralized applications being developed at an alarming rate.
Decentralization is at the heart of Web 3, and the introduction of blockchain technology plays a critical role in Web 3.0 displacing Web 2.
According to a Reuters article, over 3,000 decentralized applications on the Ethereum blockchain attest to the rapid adoption of cryptocurrency and DeFi over the last decade.
In addition, the introduction of smart contracts was a significant factor in the rapid growth of the DeFi industry. Smart contracts are computer programs that run on a blockchain to automate a series of transactions when certain conditions are met.
As a result, smart contracts help to complete the decentralized blockchain industry by allowing transactions to take place automatically and without the intervention of a third party.
Smart contracts can also be used for record preservation, transaction settlement, clinical trials, supply chain implementation, real estate sales, and governance, to name a few applications. This article will examine Oracle protocols in the Web 3 space, their current security flaws, and how these oracles can be improved.
Importance Of Oracles In Web 3
As appealing as the concept of Web 3.0 as a self-contained, permissionless, and trustless internet model is, smart contracts cannot access and handle updated information and actual data on their own without oracles.
This demonstrates the importance of oracle protocols in the long-term sustainability of blockchain technology and the DeFi sector.
Oracles are third parties, and bringing them into a transaction may expose what was previously a straightforward transaction to external influence.
In addition, according to Cryptopedia, Oracles are protocols for smart contracts in the blockchain industry to interact with external data.
Current Security Flaws Of Oracles
One of the major problems is the centralization of oracle protocols. To put this in perspective, in 2021 alone, hackers stole over $1.3 billion through oracle and bridge hacks, resulting from security flaws in existing Oracle protocols, as hackers take advantage of a single point of failure existing in these oracles protocols.
In addition, the vast majority of Oracle protocols are decentralized only in name, as hackers use their centralized servers to attack decentralized applications integrating these oracles on-chain.
These security flaws have proven very costly for the blockchain sector and need to be addressed on time to provide maximum security to users.
Decentralized Oracle Protocols As A Gamechanger
These exploits and security flaws prompted the development of decentralized oracles, which work similarly to blockchains by utilizing distributed ledger technology to tighten security and reduce hacks caused by centralized oracle protocols.
The decentralized oracles approach has proven to be highly effective in securing smart contracts and enabling seamless off-chain data verification while providing maximum asset security and resistance to hackers.
Decentralized protocols such as the, and the Witnet protocol have gone a long way toward addressing hacking and decentralization issues by promoting trustlessness and permissionless access to on-chain data, thereby securing smart contracts. The QED protocol is also worth mentioning.
As security and decentralization are at the forefront of its operations, the goal of introducing QED is to solve problems inherent in existing oracles and blockchain system models.
QED first issued QED token to oracles on its protocol to achieve complete decentralization. Oracles can use the tokens to run and own a portion of the platform.
The QED token system has aided in establishing accountability and eliminating the risk of collusion in the ecosystem. On the other hand, the platform’s Oracles can only determine the fee required to carry out the contract and cannot make other arrangements.
DelphiOracle is the most popular Oracle on WAX-io, with over 1400 actions per hour. QED is a battle-tested and proven iteration of the Delphi oracle that has been in service for over 3.5 years.
On the QED protocol, every financial transaction is entirely decentralized and trustless.
In addition, the QED protocol is blockchain agnostic, which means it can be integrated with and scaled on any publicly available blockchain.
QED employs distributed ledger technology to maintain its commitment to a decentralized oracle solution. Furthermore, QED’s innovative approach to the decentralized Oracle sector has positioned it as the ideal solution to the sector’s flaws.
The economic model of QED distinguishes it from existing Oracle protocols because it focuses on both the technological and commercial sides, both of which are critical for delivering and aggregating real-world data for smart contracts.
Due to their blockchain technology, decentralized oracles are the way forward for adopting Web 3.0 applications.
Although Web 3.0 is undeniably a potential disruptor of the current state of the internet, Web 2.0, with the assistance of decentralized oracles, has the potential to make this a reality.