On Oracles

Too often people perceive oracles as merely being Chainlink - an vastly oversimplified viewpoint. While Chainlink is the most well known, it only forms an extremely small part of the vast array of oracles that are in use today. For example, all cross-chain mechanisms, including Layer-2s, sidechains and interchain messaging protocols are all essentially, oracles.

The reasons is quite simple - the core definition of a blockchain is all the data used is generated within that blockchain and therefore verifiable by the any participant in the blockchain. Towards that same end, smart contracts can only talk to smart contracts.

Therefore, any data that anyone relies on in order to operate that is not intrinsically generated and verifiable by the blockchain - is considered fed in by an oracle.

As we aim to harmonize different blockchains for increased interoperability and more varied use cases, and transforming blockchains from entities merely churning out ‘shitcoins’ to truly collaborative and functional systems, understanding the multifaceted nature of oracles becomes crucial.

Neglecting to recognize the nuances of oracles - their different constraints, the ways they operate, and the means to evaluate them - is a discordant note in our endeavor to compose robust, capable systems that amalgamate decentralized liquidity with cutting-edge use cases.

Some criteria while evaluating oracles:

• Decentralization: Can we assert with confidence that the oracle is operated by disparate parties with no incentives to conspire?
• Distribution: Is it a solo performance, like a single server, or more of a group effort like multi-signature setups or multi-party computation mechanisms?
• Adversarial Resilience: How resistant is the system to potential disruptions?
• Fraud Proving: Is there a way to expose fraudulent activity? This question poses a complex challenge, as much data might lack a single, verifiable source of truth, and many oracle systems are bereft of transparent reporting mechanisms.
• Fraud Penalty: If fraud is detected and substantiated, does the system implement repercussions for such malicious actions?
• Robustness Penalty: Are there consequences for not contributing to the system’s overall health? Interactivity: Is the oracle a one-way communication channel or a two-way medium? While Chainlink serves as a one-way oracle, most cross-chain systems fundamentally operate as one-way systems, with two-way communication enabled by servers.

In short, the orchestra of oracles is a far richer and more nuanced composition than most people perceive. Unpacking these layers and gaining a deep understanding will certainly enhance the harmony of the blockchain symphony, enabling us to compose a future where technology and collaboration orchestrate the rhythm of innovation and new possibilities.