Smart Contracts For The People
Ergo’s goal is to create a network that can produce low-cost Defi that benefits the average person. Currently, Defi is too expensive to be helpful in a real-world setting. The goal is to create simple and secure smart contracts that can create value for those who need them the most.
An essential part of this goal is low-cost oracle data. Oracle data adds a price premium in most current forms of Defi. This cost premium is unnecessary and makes the real-world use of Defi further out of reach for the ordinary person.
Low-cost decentralized Defi can come in at a lower cost than the price premium centralized finance puts on the typical person. We beat centralized finance by providing better products, a better system.
Crypto needs to be ERGOnomic. Defi needs to be ERGOnomic.
Ergonomics is the scientific discipline concerned with the understanding of the interactions among human and other elements of a system, and the profession that applies theory, principles, data, and methods to design in order to optimize human well-being and overall system performance.
To understand what an oracle is, one must realize that blockchain systems are blind to the physical world. Oracles connect blockchains to the physical and digital world outside their respective chain.
There are many types of oracles regarding how and where they source their data, different models from various ecosystems.
Oracles are a vital component of decentralized finance as any smart contract needs a source of truth to connect a blind blockchain with the movement and pricing of the outside world.
Smart contracts need to be fed accurate information to truly be smart. Oracle data that is broadcast onto the chain is critical infrastructure. The cost, efficiency, and security of this information influence these smart contracts’ financial outcomes.
Do Oracles Need a Token?
Connecting the value of oracle data to a potentially appreciating asset makes Defi more expensive. The long-term goal of decentralized finance is to bring the power of decentralization and smart contracts to allow average users access to cost-efficient smart contracts.
Ergo does not utilize a special token to broadcast read-only API data. This design lowers the cost of oracle data. Rather than requiring smart contracts to have specialized oracle data, Oracle feeds in the Ergo blockchain to the blockchain itself. Oracle data allows users, Dapps, and smart contracts to all access the same data. Oracle data is treated as public infrastructure open and accessible to all. This design’s cost efficiency lowers the price of oracle data, which makes Decentralized finance more competitive.
If Defi will bring use and utility to the average human globally, it needs to be cost-efficient. Current gas fees and oracle data fees work well for a select few. However, adoption will never occur if it is not cost-efficient vs. traditional finance. Connecting an appreciating token to data feeds drives the user costs higher.
In the Ergo blockchain, oracles are run by miners. There is a small profit in providing such data feeds. However, the reality is providing simple data feeds should not be expensive. The current market price for oracle data in blockchains and gas fees are ridiculous. This model offers no path to compete on a global scale. It is simply too expensive. Defi for the people simply does not coexist well within a model where oracle data is tokenized and traded like an asset.
Oracle Pools on Ergo: Decentralization
Oracle pools allow multiple users to aggregate their oracle data into a pool. This improves the decentralization of oracle data. In a decentralized environment, resilience is critical. It is easy to build Defi where there are single trusted parties. However, whenever you find a centralized, trusted party, you will also find a single point of failure. More often than not, the single trusted party can also charge a premium, as there is no competition. This premium’s cost is then passed on to end-users who suffer from systems that are not cost-efficient.
Ergo has released the Oracle Core on GitHub. Developers can build and run their own oracle pools on the Ergo blockchain. Oracle Core will also provide the community of blockchain developers with all necessary tools such as code, tooling, and smart contracts to create and operate oracle pools. Open source tooling allows miners in Ergo to run an oracle core. As this becomes a popular option, as there is a small reward for posting data, it leads to decentralization and resilience.
Oracle pools in Ergo are set within a time schedule. Oracle operators in Ergo can be seen as delivery men. Their job is to post data on a schedule. The oracle data is then broadcast onto the Ergo blockchain, where it is accessible on-chain. This data delivery service does not need to be tokenized. The tooling to participate is open source, and it naturally fits well on top of a node.
Oracle Pools on Ergo: Governance
Oracle pools can use internal tokenized governance mechanisms where individual oracles operators can vote on the posting schedule, the list of oracles, or an external governance DAO. Governance provides flexibility. Governance allows oracle pools to adapt as new data feeds are available. It will enable alterations in the delivery schedule, and direct action can be taken through the governance mechanism to remove bad actors.
Oracle pools provide greater Sybil attack resistance. A Sybil attack occurs when one party operates under multiple identities simultaneously to undermine the system. Individual oracles work together in order to launch their oracle pool. One could look at an oracle pool as an association of oracle operators. Oracle pools or associations have aligned incentives together with a common goal. The model encourages cooperation rather than competition. Disincentives and governance are in place, impacting the oracle operator’s initial stake or position in an oracle pool. Oracle pools or associations do have an incentive to compete with each other. Competition is good, and it should be encouraged. However, this can be done while minimizing the incentive to produce inaccurate data.
Oracle Pools on Ergo: The Power of Open Data Feeds
Oracle data being posted on chain as a type of open and available infrastructure has powerful implications for creating low-cost Defi. Oracle pool data points benefit everyone on the blockchain. Dapps can encode an extra output that allows oracle operators to earn a small fee per transaction. Instead of having a hefty premium for specific oracle data for each dapp, the Ergo oracle operator’s business model is a small revenue stream model. This naturally aligns with the incentives of the user or entity operating the Dapp as they rely on data delivery to operate.
Oracle pools create a system where the cost to the actual end-user is minimal. It opens the door to cost efficiency. It also can be lucrative for oracle operators as their revenue stream can be continuous.
Decentralized, Governance, Incentives to Cooperate, A Model for Minimal Fees, is the path to low cost, reliable Defi that is affordable.