All DApps Need Oracles

Episode by Peter Bui on January 12th, 2024

A lot of decentralised applications are not fully decentralised and are relying on centralised services to provide data such as the price of USD/ADA. As a result, when these centralised services go down, so do the applications that use them. This is why we need to use decentralised oracle services that provide a robust source of information that is stored on chain. On Cardano, services such as Charli3 and Orcfax are the oracles of choice for decentralised applications.

Show note references

Charli3 Bridge

Charli3 Oracle Sidechain

Orcfax Validators

FACT token price

C3 token price

Charli3 Docs

Text Transcript

Now this is something that appeared on my feed the other day and this is a post from Rick McCracken pointing out this is why using oracles is important. Now this didn’t really make much sense to me when looking at it. I just looked at it, well, okay, um, I USD and Jed went down by a hundred percent. Really odd. Maybe it’s just some data error or something like that. But I saw some other posts a little bit later that day and this one here from Ilya points out.

that feeling when a single centralized element of your core DAP just turns it into just an app. And this led me to dig a little bit deeper to find out exactly what had happened because I don’t track all this stuff all the time. So looking into this post from Liquid Labs it reads, Dear Liquid Community at approximately 23, 26 p.m. UTC.

Yesterday the price of the Jed and iUSD spiked due to a faulty API stemming from our CoinGecko price feed receiving incorrect data from Wingrider’s Dex API. Okay so the problem here was the information being fed to Liquid Finance. What’s the problem all behind this? And we can have a look at this really long pull down post from Wingrider’s that explains what happened on their side.

And essentially there were some updates and the token registry got quite large due to an additional 1156 tokens being added to the token registry and it wasn’t being processed properly. And as a result the display of the numbers was much larger than what it was. So it didn’t account for the decimal places for a lot of these tokens. So this really points out the importance of using.

oracles on all of these decentralized applications so that things like this don’t happen. And for those that don’t know what oracles are, oracles are a decentralized way of providing that type of information, whether it’s the price of USD, the weather or whatever it is, these oracles obtain the data from multiple different sources and put it on chain. So getting it from multiple sources ensures that you’re not relying on one single point of failure.

and then putting it on the blockchain itself ensures that that source of information isn’t corruptible and doesn’t go down when all these dApps actually need it. So these oracles are highly important. They are all over the place on other blockchains as well. But in the Cardano ecosystem, there are two main oracles that most dApps are using if they’re using oracles and that’s Charlie 3 and Orcfax.

Now I have to say the adoption and the growth of those two platforms has been slow a little bit and I think there is a little bit of resistance in that it does cost money to use some of these Oracle feeds. Now I know the Charlie 3 team have provided the ADA USD price feed for free but it does cost money to put that price feed on chain continuously. So it will run out at some point in time. So they do need funding to keep that.

operating and going long term. And this is the same for our Orcfax as well. Now, there’s also the cost of implementing those Oracle feeds. So the Oracles may update, they may change the way they work or whatever it is. And the dApps that are using those price fees will have to reconfigure their smart contracts and off chain code to be able to incorporate that into their dApps too. So there is that cost of providing the price feed and also integrating the price feed on all of these dApps.

So fortunately for Liquid Finance and other projects that were using these centralized price feeds, they were managed to react very quickly and pause these particular pairs so that no real damage was caused at this point in time. So I’m hoping that was the case and people’s trades didn’t get completely messed up by this point of failure here through the APIs and the data feeds that were being used at the moment.

And this post from Orcfax as well also highlights that this is a problem on a lot of the L1 blockchains out there. So it’ll be really good if we can move to a completely decentralized solution here. Now I thought this was a good time to dig a little bit deeper into what the oracles are up to at the moment. And Charlie3 do have a few updates that they have been delivering for the community. First is their bridge. So if you were early.

participant in their token sale, you would have participated probably on Ethereum. And if you received your C3 tokens, you can now bridge those tokens over from Ethereum over to the Cardano blockchain. It’s a one way bridge. So those tokens be locked up and then made available on the Cardano side. So make sure you look over this tutorial here. There’s full documentation on how to connect your Metamask wallet with your C3 tokens and then convert them over to the Cardano side.

And it looks like from this documentation, they’re probably using the instant rewards API and sending that rewards data over to drip drops where you can then claim your tokens in that process. Now, there are some other interesting develops from the Charlie 3 team and this is really exciting and this is their catalyst 11 proposal that they’re piecing together. And this is all around creating an Oracle sidechain and they’re piecing this one together using a substrate, which is really cool.

Now what this means is that they can provide the price of ADA USD, that particular trading pair or whatever trading pair they want at a faster pace. So at the moment they’re providing it per block and the Cardano blockchain mints a block every 20 seconds. So that price of ADA USD is only accurate every 20 seconds. And if you’re a fast trader, if a quant trader, you want to be trading every millisecond really.

They need to be able to provide this price feed at a faster pace and having it on the their own side chain with substrate will allow DAPs to get that price feed per second. So this is a lot better in terms of being able to deliver a more robust Oracle for the Cardano ecosystem. Personally, I think this is a fantastic use case for the brand new partner chains or side chains that are coming out and using substrate for this is a brilliant, brilliant solution.

I’d love to see the C3 team have this funded and deliver this solution. So I’ll put the links down below for this particular callous proposal so you can have a look over it, read it yourself and consider it for voting in Fund 11. Now on the Orcfax side of things, this is a latest news announcement and this is around becoming a validator for Cardano itself.

So to help decentralize their ecosystem, they’re ensuring that anyone can apply and become a validator. So they’re getting the data in, but is that data correct? And the validators will ensure that the information is correct and then allow that to be posted on chain. So the whole validated network around this is also really important. And they put out this blog post about the whole process of applying and what you can do.

the requirements are for being a validator. Links down below for you guys. So this is the blog post here that talks about the requirements for being a validator. There’s only going to be 100 validator licenses available and it will cost 100,000 FACT tokens to mint that NFT license. Now you can reserve a spot to mint, but you will need 250,000 FACT tokens in your wallet to be able to reserve that position to be able to mint the tokens.

So it’s quite a high price in regards to being able to become a validator. And if you have a look a little bit further down here, you also require fact deposited. And this will be determined by market value in March of 2024 of how much fact tokens you need. It’s either going to be 500,000 fact tokens or the equivalent of 10,000 USD worth of fact to be deposited into the node validator.

So this is essentially the skin in the game for being a validator. You can’t just spin up a validator and go, Hey, yep, I’m, I’m validating the, uh, the data here because that possibly could be open for manipulation. But if you have a fact token in a deposited and locked into that particular validator, you’re putting this amount of money upfront and you’re saying that, yes, I am vested in this and I really want to be.

providing the correct data for the ecosystem. So that’s their way of ensuring that the chain, the validators don’t get manipulated. Now having a look at the price of FACT token at the moment. So it’s about 4,600 US dollars that you need sitting in your wallet. And that minting price was at 100,000. So it’s about just under $2,000 to mint.

So it’s quite a bit of money there, but like I said, it is definitely skin in the game to ensure that you don’t manipulate the markets. And Charlie 3 also has a validated network as well. I believe they’re opening that one up for certain providers to become validators of their network to ensure that the information is correct as well. So really interesting to see the Oracle ecosystem on Cardano grow.

And I really do hope that a lot more dApps do use this so that we can avoid situations of centralized platforms going down due to updates or whatever it is, especially in this upcoming bull run, I think is going to be really, really important. So if you found this content interesting and useful, please consider giving me a thumbs up, click subscribe, click the notification bell. Always always bring you guys more and more Kodama related content and I’ll see you in the next video.

You’ve been listening to the Learn Cardano.



Leave a Reply

[learndash_login login_label=" You must be logged in to post a comment."]