Re-examining the Oracle Machine: Known and Unknown Realms

Recently, with Vitalik mentioning the issue of the ultimate Oracle Machine in an article, "Oracle Machine" has once again become the focus of attention in the crypto community. Currently, Oracle Machines play an irreplaceable role in various fields such as insurance, finance, random predictions, and the Internet of Things. As long as off-chain data remains valuable, middleware like Oracle Machines will continue to play a key role in the development of the entire Web3. This is specifically reflected in the following aspects:

• With the continuous development of the Web3 ecosystem, it is foreseeable that the increase in dapps and platforms will drive the growing demand for data sources and APIs accessed through Oracle Machines. In the future, dapps, especially DeFi exchanges, are likely to integrate multiple Oracle Machines to obtain off-chain metadata, in order to avoid significant losses caused by delays or attacks from a single Oracle Machine.

• In terms of investment opportunities, although it is difficult for the traditional DeFi sector to break Chainlink's dominance in the short term, there is still competitive space in the remaining market share. Additionally, there have been noteworthy innovative protocols and narratives emerging in subfields such as L2, credit, NFT, and DID.

• From the perspective of incremental market demand and L2/ZK as well as emerging scenarios, it is unlikely that the Oracle Machine track will be monopolized by a single winner in the long run. There is still enormous development potential and market space worth exploring in areas such as off-chain computation scenarios, non-standard on-chain asset pricing, and the combination of AI/ML.

Oracle Machine Overview

concept

The Oracle Machine is middleware that provides trustworthy off-chain data services for blockchain projects. Currently, there is still a huge gap between on-chain and off-chain data, and most protocols would struggle to survive without connecting to an Oracle Machine. The key issue that the Oracle Machine addresses is how to help blockchains trust information coming from the real world, rather than just how to acquire information.

Classification

Oracle Machine can be classified into software Oracle Machines and hardware Oracle Machines based on their form, and into centralized Oracle Machines and decentralized Oracle Machines based on their data sources.

Centralized Oracle Machines are efficient but pose a single point of failure risk, while decentralized Oracle Machines are more reliable but less efficient. Most DeFi applications choose third-party decentralized Oracle Machines like Chainlink for trust risk management considerations.

application scenarios

The Oracle Machine is applied in various scenarios such as DeFi, NFT, GameFi, Social, DAO, and cross-chain, including price feeds and fair ranking in DeFi, community airdrops and price feeds in NFT, and random scene generation in GameFi.

Investment Opportunity Expectations

Main Points

1. The traditional DeFi Oracle Machine field is unlikely to break Chainlink's monopoly in the short term, but there is still competitive space in the remaining market. Possible opportunities include:

• Innovation in consensus mechanisms, such as new schemes based on game theory
• A plan to significantly reduce invocation costs

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

• L2 Oracle Machine needs to focus on low latency and security
• The credit Oracle Machine combined with on-chain credit expansion theory may become the next hotspot.
• The NFT Oracle Machine can consider off-chain valuation solutions combined with AI/ML.
• DID Oracle Machine has long-term high value, but currently mostly centralized solutions.

Case Analysis

For different segmentation directions, a brief analysis was conducted on projects such as Redstone( DeFi Oracle Machine ), HyperOracle( L2/ZK Oracle Machine ), CanDID( DID Oracle Machine ), CreDA( Credit Oracle Machine ), and Upshot( NFT Oracle Machine ).

Overall, the Oracle Machine will continue to play an important role in the crypto space in the next cycle. There is significant growth potential in areas such as off-chain computation, pricing of non-standard assets, and the integration of AI/ML, which are worth ongoing attention.