Web2 to Web3 Without The Oracle Problem
Window to the Outside World
The Internet Computer will soon make direct HTTP calls, making it possible for blockchains to interact directly with the outside world.
In the ideal Web3 future, the entire internet and all kinds of apps and services operated on chain. With an infinitely scalable blockchain (i.e. The Internet Computer) this is definitely going to happen. However, it will take some time to get there and till then, a majority of useful data (like stock prices, football scores, rainfall data, political voter results, etc.) presently served on Web2.0 will continue to be stored in traditional data centers or cloud computing infrastructure. This data is extremely critical to make Web3.0 dApps effective in many use cases, especially in DeFi applications which need real time data like stock prices, current BTC exchange rate, etc..
When it comes to blockchains like Ethereum or Solana, they cannot interface directly with HTTP because that’s not what they are designed to do, so for applications that need data from the outside, they use something known as Oracles.
What are Blockchain Oracles?
Simply put, an oracle is a provider of data.
A blockchain oracle is a third-party service that connects smart contracts with the outside world, primarily to feed information in from the world, but also the reverse. The oracle is the layer that queries, verifies, and authenticates external data sources, proprietary corporate data feeds and IoT feeds and then relays that information.
In simple terms, blockchain oracles are a layer (middleware) between the blockchain and the traditional data source, which allows interaction & data transfer to happen between the two, via API’s. Even for seemingly simple applications like pulling the exchange rate of Bitcoin, a DeFi app needs to depend on the data in the real world to update its transaction, which goes through Oracles.
What is the Oracle problem?
The very base goal of blockchains is to be decentralized and running on trustless smart contracts. However, with the use of Oracles the assumptions of decentralization & trust are challenged.
- Using centralized oracles nullifies the advantage of smart contracts & decentralized applications built on them.
- Oracles can be compromised — if a malicious actor gains access to the data flow between oracles & smart contracts the entire ecosystem will be under threat.
- Oracles are not part of the main blockchain consensus, which creates a trust conflict between third-party oracles and the trustless execution of smart contracts.
- Oracles come with fees associated as it is a third-party intermediary.
This is one of the big problems of the blockchain world that remains unsolved till date, and is probably the reason behind why no single “killer dApp” which has led to mass adoption
The Internet Computer is doing the previously unimaginable to solve this problem — Direct HTTP Calls to the outside world
The Internet Computer provides an entirety new tech stack using canister smart contracts and subnets which can potentially solve the Oracle Problem. The IC protocol can serve the web directly via HTTP calls. This is made possible with the Direct Integration (trust-less integration without third parties or bridges) features of the IC, removing the additional layer of Oracles, which means more safety.
The vision of the Internet Computer is that canisters will be able make trustless HTTP calls to external services and be able to overcome the current limitations making it :
- More convenient, and
- More secure than Oracles
Dieter Sommer, Technical Program Manager for the DFINITY Foundation, explains:
“All the nodes in a subnet make the request and only if consensus is successful, meaning at least two-thirds of the replicas agree on the result, then it is replied back to the canister as a result. This allows for a secure call outside, without any external third parties to rely on. Our consensus protocol is flexible enough to allow for such extension.”
Imagine if industries based in real time accurate data (like insurance, sports betting, political predictions, weather based applications, which are mostly centralized right now) could get disrupted with decentralization benefits of blockchain technology, while maintaining the security and trust essential to their operations. Follow developments on the Internet Computer to keep up with this disruptive innovation.
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