An Oracle is a middleware that serves as a bridge between a Blockchain (or smart contract) and the outside world.
It allows smart contracts to access information that is not stored on the Blockchain, in order to take data from everyday events in the real world.
Blockchain Oracles are designed to chain the transfer of data and protect it against tampering. Oracles do not create data.
This external connectivity exponentially increases the number of possibilities on which a smart contract can be written, allowing developers to capture more value, across a broader range of markets.
How could we manage an insurance contract on the Blockchain if we can only read token transactions? It is not possible without losing reliability. That is why we need Oracles, as a tool that can provide reliable information to a smart contract. In this case, for insurance contracts, for example, the geographic coordinates where a tornado occurred should be known to determine the location of the accident and apply the policy coverage.
It is quite difficult to work with external data. The smart contract code might be adequate, but a bad actor could fool the system by attacking the external data source, the Oracle.
Oracle decentralized networks are a means to securely connect on-chain and off-chain environments in a framework of reliability. If Oracles do not meet the same security and reliability standards as the blockchain, the entire smart contract is at risk, even if the contract code is flawless.
Building such a mechanism is a particularly difficult problem to solve, since it must provide timely and accurate information while maintaining the decentralization of data transmission in order to be reliable.
If you want to know more about Oracles, at the end of this article I leave you one that I wrote a while ago (1).
The Cardano ecosystem has little offer of Oracles projects. Currently, the Charli3 development, API3, and the Emurgo Oracle Pools project are known.
Liqwid Labs has a development of Oracle for its protocol, which was announced to be built in October 2022. Indigo it also has Oracle for its protocol.
A project has been announced by Wolfram Blockchain Labs, I don’t know its progress. Chainlink was also going to be integrated into the Cardano network, but no news until today.
Cardano Open Oracle Protocol
Cardano Open Oracle Protocol (COOP) is a set of technical guidelines that specifies a process and format for the publication and consumption of data off-chain by smart contracts on the Cardano blockchain. It is a mechanism free from the control of any entity.
Orcfax is inspired by the Oracle pool of the Ergo model: Distributed Blockchain Price Oracle. This mechanism works by congregating nodes into “pools” while keeping each node incentivized autonomously from each other. The data that is added goes through a set of processes to then be available to smart contracts.
These data take advantage of reference inputs CIP-31 Introduced in Cardano’s Vasil Hard Fork. This enhancement allows multiple consumers to read data written to a single eUTxO without competing with each other for exclusive access to transaction output.
The development of COOP was led by Orcfax with expert advice from MLabs.
The main design objectives for the COOP are:
- Financial sustainability: minimizing the cost and deposit required to publish, maintain and use Fact Statements on-chain, providing opportunities for cost sharing among stakeholders.
- Data accessibility: minimizing the probability that the Fact Statements referenced by users are not available for their dApp transactions.
- Security: minimizing the risk of exposing the cryptographic keys used to verify the authenticity of the Fact Statements.
The Orcfax oracle service will collect data on real world events from various primary sources using a network of decentralized nodes.
The nodes will be managed independently and permissionless by anyone who is able to install the free software, and commit a small amount of $FACT tokens as their stake. $FACT will be the native token used in the Orcfax network to pay for the publication of data and to reward the participants in the oracle pool.
Whenever possible, Orcfax will collect raw data from at least three independent sources to triangulate and average the information. For example, to determine the price of ADA in US dollars, Orcfax nodes could query the Kraken, Binance, and CoinGecko APIs.
The collected source data will be normalized into a standard schema, encoded, and circulated through the decentralized set of oracles, validating that the exact same data has been collected and tabulated. The data points published by the Orcfax oracle are called “Fact Statements”.
The participants that interact in the COOP protocol are the Publisher, which requests and publishes a Fact Statement, and the Consumer, which only reads the content of a Fact Statement.
If the Consumer requires already published information, the Orcfax node will respond with the UTXO identifier, which the Consumer can freely use as a CIP-31 Reference Entry in its script. Otherwise, the Consumer will pay the applicable fee in $FACT token, receiving a signed transaction from Orcfax that it will send to the Cardano network.
Each Fact Statement is uniquely identified within a catalog for which the Publisher provides a search interface. This can be used to determine the types of Fact Statements available by this Publisher, their publication frequency, and the fee charged per publication transaction.
The Fact Statements catalog, and its search interface, are outside the scope of COOP, and will be developed by Publishers, running their own COOP implementation, on the technical infrastructure of their choice.
The main value offered by a COOP Publisher is that the Fact Statements bear your digital signature, to validate authenticity. The integrity of the COOP protocol is based on the reputation of the Publisher, its quality controls, and the security of the cryptographic keys used to authorize the publication of Fact Statements.
The incentive for COOP network participants is the bounty, which is a part of the publication fee paid by the data consumer, and will be distributed after successfully collecting the source data and achieving network consensus on its normalized form. The protocol will draw the reward among the nodes that successfully participated in the Fact Statements, randomly assigning $FACT tokens.
$FACT is a native Cardano token, and is the same token that will be used for staking and data validator rewards.
Orcfax will maintain public audit trails so that the flow of information through the service can be monitored. Nodes that submit inaccurate or false data will be punished by deducting a portion of their staked $FACT tokens as a penalty (“slashed”) and their node reputation score will be affected.
The team proposes its Initial Stake Pool Offering (ISPO) to fund their project, and proposes this method as the first way to acquire the Orcfax utility token on the open market.
To the date of writing this article, Tokenomics has not been published.
The protocol will be open source, made publicly accessible and free on GitHub. The resulting Fact Statements and their metadata will be stored in a permanent, compliant archive repository built on the decentralized storage network Arweave.
The team announced that Orcfax will launch on the Cardano mainnet in Q2 2023.
Peter Van Garderen is the founder and CEO of Orcfax LLC. He says in his LinkedIn that his specialty is applying records management standards and archival research to the requirements of fully decentralized architectures, and he has been working with archival collections technology since earning his Master’s in Archival in 1997.
He is currently a project leader for:
—Landano: A dApp that mints undocumented land rights, such as NFTs, on the Cardano blockchain, in compliance with local laws and ISO standards for digital record keeping.
—Orcfax: A decentralized blockchain oracle that publishes and archives facts about real-world events.
—Arkly: decentralized, compliant management of authentic archival records stored on the Arweave network.
You can follow him on Twitter.