Oracle Machine Track Depth Analysis: Opportunities and Challenges

Introduction

Recently, with Vitalik raising the issue of the ultimate Oracle Machine, oracles have once again become the focus of attention in the crypto community. Oracles play an important role in various fields such as insurance, finance, forecasting, and the Internet of Things. As long as off-chain data remains valuable, middleware such as oracles will continue to play a key role in the Web3 ecosystem, mainly reflected in the following aspects:

• With the increase of dapps and platforms, the demand for Oracle Machine data sources and APIs will grow rapidly. In the future, dapps, especially DeFi exchanges, are likely to integrate multiple Oracle Machines to avoid losses caused by single points of failure.

• In terms of investment opportunities, although it is difficult to shake Chainlink's dominant position in the traditional DeFi oracle machine field in the short term, there is still competitive space in the remaining market share. In addition, innovative protocols worth noting have also emerged in subfields such as L2, credit, NFT, and DID.

• From the perspective of incremental market demand and emerging scenarios, the Oracle Machine track is unlikely to be monopolized by a single winner in the long run. Directions such as off-chain computing, NFT pricing, and the integration of AI/ML still have significant growth potential and market space worth exploring.

Oracle Machine Overview

Concept

The Oracle Machine is middleware that provides trusted off-chain data services for blockchain projects. It solves the problem of blockchain systems being unable to directly access external data, providing a reliable external information source for smart contracts.

The core value of the Oracle Machine lies in injecting trust into off-chain data, enabling the blockchain to trust information from the real world. A good Oracle Machine not only needs to connect on-chain and off-chain, but more importantly, it must effectively communicate, verify, and filter information to establish trust.

Classification

It can be divided into forms:

• Software Oracle Machine: Provides API/SDK access to third-party data
• Hardware Oracle Machine: such as sensors and data collectors in IoT

Divided by data sources:

• Centralized Oracle Machine: a single trusted data source, high efficiency but with a single point of risk.
• Decentralized Oracle Machine: multiple data source consensus, more reliable but lower efficiency

Application Scenarios

The Oracle Machine has a wide range of applications in fields such as DeFi, NFT, GameFi, social, DAO, and cross-chain.

• DeFi: Asset Pricing, Fair Ranking, etc.
• NFT: Airdrop, Pricing, etc.
• GameFi: Random Scene Generation
• Social: User Profile
• DAO: Community Governance
• Cross-Chain: Information and Asset Transfer

Investment Opportunity Analysis

Main Points

1. The traditional DeFi Oracle Machine sector is unlikely to shake Chainlink's dominant position in the short term, but there is still about 10% of the market that remains competitive.

   • Innovation in consensus mechanisms, such as new solutions based on game theory and DAOs.
   • A solution that significantly reduces costs

2. Potential opportunities exist in subfields such as L2, credit, NFT, and DID:

   • L2 Oracle Machine: Low latency and high security are key
   • Credit Oracle Machine: Combining on-chain credit expansion theory, the prospects are broad.
   • NFT Oracle Machine: Two approaches of TWAP pricing and AI/ML valuation
   • DID Oracle Machine: Long-term value is high, but currently mostly centralized solutions.

Typical Case Analysis

1. Redstone(DeFi Oracle Machine):

   • Supports multiple chains, rich data sources
   • Data is permanently stored on Arweave, allowing for tracking of provider reputation.
   • The price is far lower than Chainlink

2. HyperOracle(L2/ZK Oracle Machine ):

   • Based on ZK proof and 1-of-N trust model
   • Provide unique zkAutomation services

3. CanDID(DIDOracle Machine):

   • Compatible with traditional identity systems
   • Use MPC and ZK technology to protect privacy

4. CreDA( Credit Oracle Machine):

   • Multichain Data Analysis, AI-Driven Credit Rating
   • Integrated off-chain credit rating providers
   • Can release non-over-collateralized lending scenarios

5. Upshot(NFT Oracle Machine):

   • Provide real-time NFT valuation
   • Support building NFT trading strategies
   • Provide NFT wallet tier index

Conclusion

The Oracle Machine will continue to play a key role in the future blockchain ecosystem. There is still significant room for growth in areas such as off-chain computation, pricing of non-standard assets, and the integration of AI/ML, which are worth continuous attention.