What Is Optimistic oracle?
Optimistic oracle is a system that combines data from the real world with a decentralized system, such as blockchain. In this system, data is accepted as correct if there are no disputes for a certain period of time.
This “optimistic” design differs from price oracles (price-feed), where prices are displayed directly on the blockchain.
The Optimistic oracle has three actors in its system. The three are requesters, namely contracts that request data; proposers, namely the off-chain actor who proposes data; and disputers, namely off-chain actors who can dispute data they disagree with.
In an ideal scenario, a contract requests data and specifies a dispute period, from a few minutes, to a few days. Proposer deposit collateral and propose data.
After the dispute period ends, the data is finalized and the proposer gets his guarantee back. This process is fast and cheap.
In a non-ideal scenario, a disputer disagrees with the proposed data. Disputer deposits the same collateral as the proposer and submits a dispute to UMA's Data Verification Mechanism (DVM).
UMA token holders resolve disputes within a 48-hour period. If the disputer is right, they get the proposer's guarantee as a prize; if the disputer is wrong, they lose the guarantee as a punishment given to the proposer.
This system is optimistic because disputes are designed to occur very rarely. The UMA contract has operated optimistically over the past year. During this period there were only 5 valid disputes.
So, what are the advantages of optimistic oracles? You can find out below.
Optimistic Oracle Benefits
Optimistic oracle offers various advantages for users who want to use real-world data in a decentralized system, including:
Arbitrary data
Optimistic oracles can provide any data required by a contract, not just asset prices. For example, an optimistic oracle can provide data about the weather, sports results, number of users, or anything else that can be objectively verified.
Data long-tail
Optimistic oracles can provide data that may not be available or economically feasible for price-feed oracles. For example, an optimistic oracle can provide data about the prices of assets that are rarely traded, the future prices of assets, or the prices of assets that are not listed on an exchange.
Accurate data
Optimistic oracles can ensure that the data provided is correct data, because there is an economic incentive to dispute incorrect data. If there is a dispute, the data will be verified by DVM, which is a decentralized and trusted oracle.
Cheap data
Optimistic oracles can save gas fees (crypto transaction costs), because data does not need to be published on the chain continuously, but only when there is a request. Apart from that, dispute costs can also be minimized by setting a fairly high guarantee for the proposer and disputer.
Example of Using Optimistic Oracle
Optimistic oracles can be used for various purposes that require real-world data in decentralized systems. Here are some examples of using optimistic oracles:
KPI Options
KPI options are options whose payoff value depends on the achievement of certain key performance objectives (key performance indicators). For example, a crypto project can issue KPI options whose settlement value depends on the number of users or transaction volume.
Optimistic oracles can be used to provide data about these KPIs and calculate the repayment value.
Insurance Options and Structured Products
Insurance options and structured products are financial products whose repayment value depends on whether or not a certain event occurs. For example, an insurance option can provide protection against the risk of property damage due to natural disasters.
Optimistic oracles can be used to provide data about whether natural disasters will occur or not and calculate the settlement value.
Synthetic Tokens
Synthetic tokens are tokens that track the price of another asset without requiring ownership of that asset. For example, a synthetic token can track the price of gold, stocks, or foreign currencies.
Optimistic oracles can be used to provide data about the price of a tracked asset and calculate its liquidation or settlement value.
So, that's the article about optimistic oracles. Hopefully it can increase your knowledge, OK!
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DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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