An Introduction to ORAO
On our Medium account we share a number of articles that go deep into ORAO and the wider oracle and DeFi markets. However, not everyone is familiar enough with oracles, or even crypto in general, to dig deep on their first foray into a project. So we decided to create an introductory article, which explains ORAO on a level that doesn’t require a lot of previous crypto knowledge, while still giving a good idea of what ORAO is and does. So if you are new to the space, this is the article for you!
What is an Oracle?
Smart contracts allow for some really cool stuff. You may have heard of Uniswap, or of decentralized exchanges in general. These are a particular kind of smart contract that allow us to eliminate middlemen (Like Coinbase, Binance etc), and so take away the need for trust in some central authority. You know that you get a fair trade not because there is abroker sitting in the middle matching orders, but because that’s just what the smart contract does. It plays fair, always. And if you are a programmer, you can examine the code for yourself and see exactly how it works.
However, smart contracts do have some significant limitations. Being constructs that exist entirely on the blockchain, they can’t reach out into the world outside. It’s like a one way mirror. We can see what happens on-chain, but nothing on-chain can look back. Anyone can print information in a transaction in the next block, but the problem is anyone can do it, and the smart contracts on-chain can’t verify that the information is true. You can sign information with a private key, of course, and a smart contract could be written to go “Ah yes, I do trust Bob, and he says the price of Bitcoin is $55,480.” But… Now we’re back where we started. Our decentralized, trust-less smart contract requires trust in a central authority.
And this is where oracles come in. Oracle networks create a data marketplace where, instead of trusting a single, arbitrary authority, anyone can participate in the buying and selling of data. You can still lie… but now you lose money if you do. To become a data provider you have to put up a stake; a big pile of tokens that can be confiscated if you try to cheat. On the other hand, if you provide good data you can get paid for it.
Different oracle platforms have different mechanisms for how all of this works. In ORAO’s case, the network compares the data you provide to the data everyone else is providing, as well as the data you have provided in the past. If one data provider suddenly makes a sharp turn that nobody else does, that’s flagged as suspicious data, and then things go from there.
What makes ORAO special?
The oracle space is now coming up on five years old, with each generation of oracle platforms innovating on the last. Even the most popular platforms, however, suffer from a few weaknesses. In particular, the range of data they oracles can sell is very narrow, confined almost entirely to financial data — mostly price feeds. Because transaction size also comes at a significant premium, even the financial data oracles provide tends to be very shallow.
ORAO solves this with the addition of Predefined Data Protocols. Instead of having fixed protocols that provide only the same data product over and over, our platform allows data providers to choose between a variety of different protocols — from narrow price feeds to more detailed market data to non-financial data. With ORAO oracles can credibly and in a standardized way support data products for anything from weather data to cancelled flights to the outcome of a specific football match.
Cross-Chain Interoperability
In addition, ORAO is built from the ground up to support data transfers from one blockchain to another. If a smart contract on Ethereum wants information that is available on EOS, ORAO allows for oracles that can provide that. With the explosive rise of DeFi (Decentralized Finance), and the scaling and fee issues experienced on Ethereum now, it seems clear the demand for cross-chain transactions will only become more popular with time. To offer the best possible support for this, we chose to build ORAO to be native on Polkadot, where we will run a parathread. Building for this interoperability from the very beginning gives ORAO an incredible headstart, compared to older oracle platforms that started out only on Ethereum and decide to pivot later on to multi-chain support.
If you enjoyed this first introduction to ORAO and want to learn more, do read our other articles on Medium. And if you want to dig deep, check out our website, dig into our whitepaper, or join our Telegram channel to speak directly to members of the team and community.
