Oracles, the unsung heroes of the blockchain world, have played an increasingly important role in ensuring our data flows from one place to another securely and in a trustless manner.
As blockchain technology continues to evolve, so do the ways in which we use oracles to bring real-world data and assets on and off-chain. From decentralized finance to virtual worlds, oracles are being leveraged in a myriad of ways to create new and innovative applications. But what does the future hold for these powerful tools? Here are our five predictions for the state of oracles in 2023.
1. Decentralized oracle networks will become the norm
Decentralized oracle networks such as SEDA are operated by a decentralized network of nodes, reducing the risk of a single point of failure and making them more resistant to external manipulation.
They act as a bridge between the blockchain and the external world, making it possible for integrated parties to execute data requests, connect to any data source and query its data securely and permissionless. Learn about oracle real-life use cases here.
2023 will see an increase in the use of these decentralized oracle networks as parties look for more tamper-proof and reliable ways to bring data on and off-chain.
2. Oracles meet AI
One of the most important technological trends in 2022 was the rise of artificial intelligence, particularly with the explosive popularity of platforms like ChatGPT and Lensa.
This year, we predict that crypto projects using AI will leverage oracles for the transmission and computation of data. Through AI, projects can reimagine datasets, finding new (and likely better) ways to reformat them for access and distribution.
3. Advancement of oracle security mechanisms
As reliance on oracles increases, so too does the need for robust security mechanisms to protect against malicious actors. This year, we expect to see the development of various advanced security measures, including:
- Increased development of single-layer shared security mechanisms, where all tokens are on one layer instead of spread across many chains
- Anchor nodes that provide backups for data feeds to ensure trustless fallback mechanisms for data outages or stale data
- Permissionless validator designs that allow anyone to run a node without needing whitelisted permission from a centralized entity
In 2023, we also anticipate the aggregation of multiple oracles– combining oracles with different security assumptions for increased accuracy and reliability.
4. Oracles will work on increasing their token utility
Ever come across a blockchain oracle with a token and struggled to understand its purpose?
Tokenomics have been a topic of great discourse within crypto communities– why do projects have tokens? And do they actually add any value?
In 2023, we predict some oracle teams will focus on creating more utility for their tokens by using them for network security, reputation scoring, and value accrual.
The SEDA token, for instance, is used for securing the main-chain and each individual sub-chain bridge. SEDA is required as a prerequisite for requesting data. It must be purchased and burned in order to issue a data request. Validators can derive value through inflationary mechanics for processing blocks and data requests on the main-chain, as well as bridging data to sub-chains. Read more about our tokenomics here.
5. Enhancing OEV for Arbitrage Searchers
Oracle Extractable Value, or OEV, is set to become a powerful tool for Arbitrage Searchers in 2023, thanks to SEDA. SEDA is not only a multi-chain messaging protocol, but it also will have the ability to power Searcher transactions built directly into price feeds.
As opposed to existing smart contract oracles, OEV Searchers will be able to do complex arbitrage transactions that rely on data feeds in a multi-chain environment. A data request is processed on our main-chain, but before being bridged to the sub-chain, OEV Searchers will have the ability to tip SEDA validators to include an arbitrage transaction within the same transaction as the price update. This means that instead of the price being consumed in one block and an OEV transaction in the following block, SEDA can guarantee that an OEV searchers transaction will be mined in the same block as the price update. This change in architecture ensures that SEDA OEV Searchers will have the ability to front-run any Searchers on the main-chain and will make protocols integrating with SEDA data feeds more capital efficient than their competitors that rely on first-party smart contract oracles.
This shift in revenue away from the main-chain validator for each sub-chain and move towards the SEDA Network makes it the most profitable network to operate on for OEV Searchers as they can operate their own SEDA Validator in addition to identifying arbitrage opportunities. For this reason, we predict that SEDA will become one of the most popular networks to operate on for Oracle Extractable Value.
Oracles have become a vital tool in the blockchain world, connecting real-world data and assets to and from blockchain networks in a secure and trustless manner. In 2023, we predict that decentralized oracle networks will become the norm, as parties seek more tamper-proof and reliable ways to bring data on and off-chain. Advancements in oracle security mechanisms will also be a focus, as reliance on oracles increases. Overall, 2023 promises to be an exciting year for oracles, as they continue to evolve and bring new possibilities to the blockchain world.
About SEDA
SEDA is a multichain, permissionless protocol connecting real-world data to any network on-chain.
SEDA is backed by world-class investors such as Distributed Global, Coinbase Ventures, Reciprocal Ventures, Coinfund, Maven 11, Flow Ventures, among others.
Join SEDA’s community:
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