It is important that conventional companies join the decentralised ecosystem in order to improve the industry’s security and credibility.
Blockchain technology is revolutionising the way we communicate, transact and exchange knowledge, with many analysts predicting that it will be the most disruptive technology in the next decade. After little institutional advancement since the 19th and 20th centuries, decentralisation has brought more openness, independence from intermediaries and increased productivity to industries such as banking, media and technology.
Traditional businesses depend on a centralised closed-door system. On the other hand, decentralised finance initiatives are being designed on the premise that government should be decentralised and democratic. Transition of society to decentralised networks will make many services safer, more available and more open than ever before. The growing interest in space speaks to a collective desire to have more influence over the essential elements of our lives, particularly our finances.
Although decentralisation helps to solve problems such as accountability and performance, the lack of a trustworthy central authority means that decentralised applications or DApps must depend on third parties to provide data for the execution of transactions or application functions such as borrowing. Access to accurate, reliable information such as price feeds, real-world events and recognition, among many others, underpins the reliability, power and efficiency of a decentralised application.
The security to protect these data comes from an oracle solution that is capable of connecting real-world and off-line information reliably and effectively with decentralised applications and smart contracts in a verifiable, manipulatively resistant manner. With more than 1 million daily users of DApps worldwide, there is a tremendous need for accurate data outside the blockchain because it underpins the security of DeFi applications and the billions currently locked in space.
Following hacks, attacks and data manipulation, the challenge facing blockchain technology is to create trust and build secure systems in the absence of established enterprises or government regulations. This is where new technologies such as data oracles are essential in order to establish a secure link between traditional companies with reliable price feeds and a decentralised ecosystem.
Connecting the old and the new
Data oracles act as a bridge between decentralised blockchain applications by aggregating and linking real-world data to smart contracts. These decentralised applications then use smart contracts that are self-executed when certain criteria are met, such as collateral liquidation, which requires a price oracle. In the absence of a centralised authority, data oracles are essential for connecting blockchain-based applications to the information required for the execution of such smart contracts.
The use of Smart Contracts and Oracle Technology cases is extensive and spanning insurance, real estate, healthcare and, most importantly, DeFi, where millions could be involved in security infringements.
In DeFi, there are plenty of instances of hacks. Data oracles are inputs to the logic of smart contracts and therefore dictate their behaviour: output. If the input oracle data is incorrect, this leads to the unintended behaviour of the smart contract and may result in losses of funds or other undesired outcomes, as seen in even the strongest DeFi projects. These structural challenges make the widespread adoption of data oracles essential.
There is a desperate, critical need to connect Web 2.0 to Web 3.0, to create a more resilient, efficient, censor-resistant Internet. Traditional Web 2.0-based companies are not yet structurally ready to make the transition to DeFi due to the learning curve, know-how and organisational flexibility required. These traditional companies will require seamless on-board processes with a high level of flexibility and customizability to act as a bridge to Web 3.0.
This is where new oracle technology will come in, providing support and systems for businesses to make a leap into Web 3.0 without the companies themselves having to deal with the process.
While DeFi has undeniably boomed over the past year, space still requires wider adoption by the majority, who do not have coding expertise, as it is this accessibility that will create a truly robust DeFi ecosystem.
Traditional enterprises also benefit greatly from this transition, as their data is a valuable resource for decentralised applications and an innovative new revenue stream is ripe for market capture as the industry continues to grow.
Why we must incentivize traditional enterprises to the blockchain
Many decentralised applications require real-time information, such as price feeds, sporting results, weather and news updates. Traditional companies that can provide reliable real-world data must take advantage of this growing demand by connecting to decentralised applications and marketing these data through a reliable data oracle. For example, tech and media giants like Google and Bloomberg would benefit greatly from the use of a data oracle.
This is an exciting step for the industry, as when large companies dip their toes into DeFi, it adds extra security and legitimacy to space. In turn, this transition will create an additional source of income for these established enterprises in a new, thriving industry. Traditional companies have no choice but to enter space or risk being left behind as the world continues to adopt DeFi, DApps and smart contracts.
Connecting directly to data sources is the best way for companies to insure the security and integrity of their data—enhancing the overall security of DeFi space and the entire decentralised ecosystem. Oracles have a very important role to play in this process and in building trust in DeFi and the wider blockchain industry.
The future is decentralized
Many large companies have already incorporated decentralised technologies into their business models. It is up to the leaders in the DeFi space to engage and guide these traditional businesses in order to bring about significant change and evolution. It is imperative that the industry gives priority to usability, simplification and community education in order to experience the widespread adoption of DeFi. The future is decentralised, and there is so much room for the industry to grow—only at the beginning of the revolution.
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