Today’s world is completely dominated by the concept of centralization in all sectors with banking being the major amongst it. Though centralization gives us a secure feeling that our data and assets are being maintained by trusted and reliable entities, in reality it is the other way around in many cases. Centralization takes away the complete control from the users to one particular entity which poses a very high security risk at times.
To overcome the issues with security and to provide a trusted and reliable system we are at a stage to shift the gear towards decentralization. This will provide an environment which is not controlled by any single authority but a collective group of entities which ensures to provide a high level of security and shifts complete control of data from a centralized authority back to one or more trusted entities. This gives birth to new blockchain + smart contract based applications which are called Decentralized finance aka DeFi.
Blockchain technology is not just about bitcoin to deal with crypto assets but in reality it has the capability to transform businesses with the advent of smart contract based blockchain frameworks like XinFin Network and Ethereum. An ideal example of this is the DeFi space which has been mentioned aforesaid.
DeFi applications provide market making functions and use blockchain and smart contracts to provide a decentralized, transparent, peer to peer system and most importantly eradicate the central authority thereby becoming a boom of a billion dollar industry. In order for them to work it depends on a lot of external data into the blockchain such as live currency exchange rates for real time settlement, weather data for insurance with farmers, inflation data etc. But the challenge is that to access and get trusted data from the outside world onto the blockchain is where Oracle comes to the rescue. However, it is important to note that the oracle should be decentralized to be more trusted and reliable.
In simple terms, oracles acts as the intermediary between the blockchain smart contracts and the world of external data sources in a similar way traditional software application uses API to fetch data. But oracles are not as simple as an API, but a powerful source of trusted and reliable data from the external world. For example, a DeFi application on blockchain requires a real time price of BTC/USD. Oracle fetches the data from verified data sources and provides it to the user by the blockchain application.
There are many oracles out there trying to play a vital role in bridging the gap between blockchain applications and the external data but not all of them succeed. One of the main features of any oracle would be a decentralized architecture so as to provide a reliable data source. This becomes very critical in any blockchain application to get on the right data which will otherwise pose a very high risk. For example, providing an incorrect value of BTC/USD rate to a DeFi application will result in a huge loss which may sometimes result in lawsuit. So, it’s highly recommended for any oracle provider to follow decentralization to avoid single point of failure and to provide the right data.
Plugin, a decentralized oracle platform, provides cost effective solutions for any smart contract on XinFin ecosystem. GoPlugin.co collects data from different external sources, consolidates and makes sure the correct value is provided to its users at any point of time. This is the most crucial part for any decentralized oracle provider that is highly trusted by all its users. Plugin eco system is a powered token called “PLI”. PLI token build on XinFin’s XRC20 Standard to reduce GAS fees, enhance transaction time and provide feasibility to hundreds of Dapps to reach Data Oracle to Billions of people worldwide. Weather decentralized Data provider project under Pilot testing and expecting to go live by November 2021.
The data collected from different oracle nodes is consolidated to arrive at the correct value. This doesn’t mean that the system is fully decentralized. In order for this kind of system to avoid vulnerabilities and provide a blockchain peer-to-peer system, any decentralized oracle provider must rely on the community to choose the data sources and validators and also on the rewarding & penalizing mechanism. Plugin uses an approach of carrot and stick for rewarding the best and penalizing the vulnerable actors.
Plugin provides a high level of security and scalability for any kind of blockchain applications which uses its data feeds. The main advantage of using Plugin is that the data feeds are being provided by the platform at a very low cost compared to any other oracle providers as also the data feeds are highly diversified according to the needs of the customers and the XinFin community. As a result, Plugin can be considered as a decentralized oracle provider which is economical, scalable and highly trusted. The potential of decentralized applications is limitless, and oracles are an essential part for enabling them to standardise our institutions.