ORAO: What is Data?
Smart Contracts serve an incredible function in eliminating middlemen and allowing for decentralized applications nobody could even dream of a decade ago. However, being a construct existing entirely on the blockchain, they have some severe limitations. Smart contracts can never reach out directly into the world to learn new information. This of course is where oracles come in, to secure a market where data can be trusted through economic incentives. But what data do smart contracts need, and what are the difficulties in providing it?
Early Oracles and Financial Data
Perhaps not surprisingly given the nature of cryptocurrencies, the first data products supported by oracles were financial data. Oraclize (Now ‘Provable’), which launched in 2016, provided simple price feeds from trusted sources like the large exchanges. Access to external price feeds allowed for the creation of different DeFi applications, such as asset trading without the use of centralized exchanges as trusted middlemen, or even futures contracts.
However, on blockchains capable of supporting smart contracts, transaction size comes at a steep premium. Even if you need to send information, you have strong cost saving incentives to keep that data as brief and simple as possible. For example, if you want to print the current price of Bitcoin, it’s going to be pretty hard to justify including price points from multiple different exchanges, even though that might be slightly more accurate than just quoting a single price.
It gets worse. A smart contract about to engage in a trade could use even more detailed information. If the current price of Ether is $1,800, we may also want to know the order depth. How much slippage will there be if we dump 1000 ETH in one go? For a human user this information is readily available. Using APIs from major exchanges you can get rich data, showing order depths across multiple different exchanges, allowing you to execute simultaneous trades in one go to minimize slippage. Transmitting all that information on-chain, however, would be prohibitively expensive. And so, smart contracts are designed to require as little data as possible, and oracles have been designed with data protocols that provide as lean of a data product as possible.
Opening the Door to more varied Data Products
We use the example of price feeds to illustrate that there is always more data that could be included, but ultimately oracles have to define a data protocol that sets the parameters for what information will be included and what it looks like.
With ORAO we try to acknowledge these market forces while still opening the door to more variety in data formats. Using Orao’s Predefined Data Protocols oracles can be set up to offer different versions of data products. If all a data buyer needs is the current BTC price with no context, our data providers can offer that. But, if some of those buyers do want richer information that is available as well.
Predefined Data Protocols are a central part of Orao’s value proposition. The same architecture that allows data providers to provide variations on financial products also allows them to offer non-financial data. As long as what a data buyer wants can be boiled down to numbers or a verifiable yes/no statement, a data protocol exists or can be created for it. Insurance smart contract needs to know if a specific flight was cancelled? There’s an API for that, and data providers can tap into it and pass the data on to the buyer. Betting dApp needs to know how Tuesday’s Cubs game went? Easily verified.
Different Data Protocols have different demands on transaction size, and so network fees. That is one more reason why we are building ORAO for Polkadot, where we will run our own parathread. This will allow ORAO to offer the best possible support for running our network on multiple different blockchains, from Ethereum to Kusama to EOS, wherever demand arises. Through natural response to market forces, we expect to see larger data products moving between chains to be more popular where fees are lower, to the benefit of data buyers and providers alike. Even on Ethereum, however, many different approaches are worked on to improve scaling dramatically, including layer two solutions. As these solutions are implemented, transaction costs on Ethereum should come down significantly, increasing demand for ORAO’s more complex data products.
If you would like to learn more about ORAO, you can check out our website, dig into our whitepaper, or join our Telegram channel to speak directly to members of ourteam and community.
