Author: Bryan

Original source: IOSG Venture

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The application of oracles in DeFi: Price Feeds is not simpleThere are two main types of oracles that are widely adopted in DeFi.One type is a general-purpose oracle machine represented by Chainlink, providing volume weighted average prices (Volume Weighted Average Price), and reaching cooperation with mainstream defi agreements such as Aave and dydx.The other is that DEX itself can be used as a source of Price Feed

, use TWAP (Time Weighted Average Price) to automatically realize the price derivation calculation, and open the interface to other protocols.

In the field of DeFi, the main usage of oracles is as Price Feed (price feeding service). A qualified oracle machine can update the price of the underlying asset in a timely and accurate manner when needed. For example, in Chainlink's price feedback mechanism, whenever the price of the underlying asset changes by 0.5%, it will automatically trigger a price update. The real-time accuracy of prices is very important for DeFi, especially as the current DeFi protocols use more and more complex models. The chain reaction caused by untimely prices will cause huge losses or even collapse of the protocol.

Another basic condition for becoming a publicly recognized oracle isdecentralizeddecentralized, that is, whether it allows a single point of failure. Many advocates of decentralized oracles claim that centralized oracles would render blockchain efforts pointless. The most widely used protocols in the market, such as Chainlink and Band Protocol, are very. For example, Chainlink divides the nodes into two distinct parts, one of which is responsible for uploading off-chain data, while the other is independently responsible for further verification. With the exception of Compound, which still uses its own centralized oracle, most DeFi protocols on the market have/are planning to integrate with third-party oracles, mainly because of their wide market coverage and decentralization.

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Oracles could be the key in GameFiCryptomines is an example of oracles being actually used in crypto gaming. The most unique feature embodied in this use case is that,Token payment and minting amount can be automatically adjusted by oracle to ensure the stability of its dollar value

, so that even a novice who is not fully familiar with the project can predict his/her payback days with simple mathematics. This novel mechanic, known in Cryptomines' case as a "pancho," enables the game to consistently acquire new players. However, the oracle mentioned above was built specifically to manage token prices, rather than report prices like we see in most use cases, so it may not necessarily be a general solution that every game needs.VRF(verifiable randomness function verifiable random function). Whether at the infrastructure level or at the application level, randomness is an important part of the blockchain. For example, Axie leverages Chainlink VRF to provide security for minting scarce NFTs. During minting, it is resistant to predictable certainty that can be manipulated by an attacker. For gamers, VRF can be implemented in situations where rewards must be distributed in a fair and random manner, or when opening loot chests containing random game assets.

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The oracle machine will become a bridge for grafting different ecologies in the future

Although DeFi has been somewhat saturated recently, we believe that when new infrastructure enters the game, oracles will have the opportunity to play a greater role. The off-chain data transmitted to the chain will be much more than pure price feed data. For example, to expand the scope of current insurance agreements, there are many classes of off-chain data that have not been exploited, such as a person's bank account history, indicators of global markets, namely real interest rates, pricing indicators such as inflation rate/CPI, and so on.NFT oracles can serve as a bridge connecting DeFi and NFT.

We've seen some projects moving in this direction, but no practical milestones yet. Imagine that borrowers can put their NFT as collateral, and mainstream tokens (such as Eth) are no longer the only option, and the capital utilization rate will be greatly improved. The tricky problem with NFTs as collateral is that either the liquidation process for NFTs may not be as smooth as tokens, or the habit of borrowers has not yet been developed, i.e. no one can bear the risk of possibly losing his/her punk . Considering that the properties of Gaming NFT are relatively close to tokens, we expect that Gaming NFT may be more suitable for lending than PFP NFT. Additionally, fiat-denominated NFTs will take off massively as we see Coinbase open up its own marketplace, and even Opensea enable Moonpay. The oracles would be happy to take a piece of the action.Another direction in which oracles may have a more positive effect is data indexing. Following the lead of The Graph, API calls became more frequent as we saw unicorn apps skyrocket in the market. However,A major criticism is that the imbalance between API curation and invocation remains a major hindrance.We have seen many curators staking Subgraph, but the actual API calls that occur are random and infrequent. Our analysis of the cases we have seen shows that there are several reasons for the lack of continuous calls.

1. Dapps may only need to call an API occasionally, rather than frequently 2. Dapps may find that using the underlying API is not as useful as imagined, so they no longer query.Taking Twitter's API as a reference, it is suggested that the average calling interval of the API is 15 minutes. However, for most popular subgraphs, the pattern of invocations is fairly random — for Livepeer, the 2nd Dapp that is almost fully curated, the number of invocation requests peaked between June and August last year , and in the past 6 months, we have made very few requests.

Additionally, users sending calls currently do not need to pay any $GRT tokens (or very little), although The Graph's original model assumes that users need to pay some tokens to reward indexers. Currently, our guess is that The Graph itself is subsidizing indexers.The oracle, acting as a middleman between The Graph and the Dapp, enables web3 API queries to achieve the same level or even higher activity than we have seen in web2. Specifically, the oracle can provide two kinds of help, so that the entire dynamic process has a stronger stable binding. To help eliminate the current problems with The Graph,The oracle machine can obtain the access rights of all subgraphs, and then provide the most reliable subgraphs most needed by Dapp.