Essential data feeds in blockchain contracts. Data feeds – free sources of data for smart contracts. How do they work and what value do they bring to web3 solutions?
Exploring Blockchain Oracles and Their Functions
In several recent posts, I’ve broken down the functioning of blockchain oracles. Oracles are often attributed with an almost omnipotent ability to supply data to contracts, but in reality, they have many limitations and risks. I encourage you to check out my posts if you’re interested in this topic (links in the comments). It’s valuable knowledge for anyone involved in the blockchain industry.
Challenges Faced by Decentralized Oracles
The decentralized use of oracles involves querying data from outside the blockchain through several independent oracles, then independently determining the final value based on multiple responses from multiple oracles. Unfortunately, a smart contract implementing this strategy will incur high costs. Querying oracles requires a fee in exchange for off-chain query execution.
Significance of Data Feeds for Smart Contracts
Data feeds are data “produced” by oracles, published on the blockchain, and available for free reading by smart contracts. What kind of data? For instance, cryptocurrency prices (BTC/USD, ETH/USD, etc.) – highly valuable data for DeFi (decentralized finance) solutions. Other data includes cryptocurrency reserves held by certain blockchain solutions. There are also data related to NFT prices.
Community-Sourced Data Feeds and Their Impact
Who produces data feeds? The community; one could say it’s a sponsored activity. Many projects rely on this data, so it’s in demand. The data provided by data feeds and their quality vary depending on the provider of the oracle technology/network.
Insight into Specific Data Feeds – A Case Study of ETH/USD on Chainlink
Here’s a dashboard describing a specific ETH/USD price data feed on the Chainlink network: [Link]. The page includes information about the number of oracles providing data (e.g., 31). The final, single value of ETH/USD available for contracts to read is stored in the blockchain based on 31 oracle responses. Due to the widespread use of this data, it’s of high quality and can be safely used in web3 solutions.
Chainlink: A Key Player in Oracle Technology
Essential data feeds in blockchain contracts. I mention Chainlink each time in the context of oracles. What is Chainlink? What products does it provide? I’ll discuss this in my next post. Follow my profile if you’re interested in blockchain. It’s my professional focus.
I design and build enterprise IT solutions based on blockchain technology.
I am blockchain architect in Trans.eu building ECMR (digital CMR Consignment Note) based on blockchain. I teachabout Bitcoin, blockchain and decentralization via Linkedin and blog: https://mobycrypt.com.