Introduction

For as long as blockchains have been programmable, developers have attempted to bring data on-chain. Blockchains offer amazing properties, especially in terms of transparency, immutability, and openness. While we focused on building and enhancing the capacities of those blockchains, we inadvertently created a completely separate world, governed by decentralization and trustlessness, and not connected to our real world. When the infrastructure became mature enough, developers started to build decentralized applications, taking advantage of this technology. However, they quickly realized that in order to build the best applications, they needed to access data from outside of a blockchain.

The rise of oracles

As developers sought ways to access data beyond the blockchain, some teams began contemplating the design of an infrastructure that could create a general-purpose network, connecting blockchains to the outside world. The promise of such an infrastructure was to provide data needed for any application while still adhering to the rules of the blockchain world. This meant that the data introduced into the decentralized and trustless blockchain world should have the same properties as this world. Thus, teams, particularly Chainlink in 2017, initiated the construction of a new decentralized network - a new trust network - that aimed to serve as a definitive source of truth between blockchains and the external world. This new infrastructure, called Oracle, facilitated a multitude of innovations in the crypto space, primarily because it offered the following advantages:

1. Cost-Effectiveness: Most of the oracles provided their services for free or at a significantly lower cost compared to the expenses involved in running one's infrastructure. This accessibility became highly beneficial for developers.

2. Enhanced Efficiency: Many protocols experienced increased efficiency by incorporating data from the outside world, particularly within DeFi protocols. This efficiency could be explained by the mitigation of information asymmetry.

3. Security: Generalized infrastructures like Oracles tended to be safer than self-hosted solutions since their primary focus revolved around ensuring security.

For all those reasons, Oracles powered the main innovations in crypto, and especially the DeFi summer in 2020.

“A chain is only as strong as its weakest link” - Thomas Reid

Now that the initial excitement has subsided and the ecosystem has narrowed its focus to core primitives rather than noise, a fresh wave of protocols is advocating for oracle-less primitives (Blur, Panoptic, PWN, Ajna, Timeswap…). This shift stems from the realization that relying on an Oracle, which is essentially a trusted third-party service, undermines the fundamental principles of decentralization. And those protocols are right, why leverage the most secure and decentralized network aka Ethereum to build Decentralized Finance, if everything is ultimately secured by a trusted service – Thomas Reid almost predicted this in 1786.

Now the 1m dollar question arises: should we discard all the efficiency and user-friendly features that oracles have provided in exchange for something that introduces greater complexity and barriers to entry for participants while potentially fragmenting liquidity just because we couldn’t build more decentralized, resilient, and secure oracles? Our resounding answer is no. We firmly believe that we can strengthen the weakest link in the chain by using validity proofs and implementing a better design.

Long live Oracle!

At Pragma, we firmly believe in continuously improving and setting higher expectations for Oracles. Moving forward, we commit to documenting and sharing our progress, developing secure, decentralised, trustless, and open-source software. Over the next few weeks, we will publish several research articles here on Mirror, that elucidate the rationale behind our diverse design choices and the direction we are pursuing.

We recognise that the best designs are born from iterative processes, and we don't claim to possess all the answers. That's why we invite you to actively participate in this journey and contribute your insights along the way.

Let's unite our efforts and propel the space forward together.

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