Let’s begin with an example. Two friends, James and Martin, decide to have a bet on the result of an upcoming game of cricket. The teams playing are India and England. James believes India will win while Martin believes England will. Noting the hype around blockchain currently, both decide to enter into a Smart Contract (this is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code) over the blockchain for this bet.
The smart contract includes the terms of the bet (James declared a winner if India wins; Martin declared a winner if England wins) and locks their funds. The smart contract on the blockchain will release the funds to the winner based on the result of the game.
Now, here’s where Oracles come into play. But before that, a meaning to the term oracle:
The term Oracle has been used widely in mythology, specifically Greek mythology. It denotes a gateway to knowing the will of the gods. The most famous oracle was the priestess of the temple of Apollo at the sanctuary of Delphi.
So oracles can be thought of as a bridge. There they were the bridge between the Gods and humans. Here, within the area of blockchain, oracles act as a bridge between the external world and the blockchain world. In our earlier example of the bet, there’s no way the smart contract can figure out a winner of the cricket game between India and England unless it is fed with that information. The Oracle feeds it with that information. The oracle provides the result of the game to the smart contract which then executes the terms outlined.
With the concept understood, expand it beyond a sports game, and think of the scope here:
- financial asset prices, eg. oil price, gold price, prices of stocks (data pulled from a service like Bloomberg)
- top trending movie (think of this data getting fetched from IMDB)
- top trending songs (this can get fetched from YouTube)
How do Oracles fetch this data? By the use of API’s (Application Programming Interface). Won’t spend too much time explaining this. But here’s an example that should clarify what it means. Have you ever booked an airline ticket on say, Skyscanner? You enter the details of your planned travel. The site then fetches details from different airline websites to showcase options. This fetching of details from different sites happens using API’s. So simply, API’s are a way websites and/ or applications interact with each other to exchange information.
The platforms which fetches this data are the Oracles. So the scope of oracles in blockchain is enormous.
The Oracle market in crypto:
This is a $12.8 billion market as of today. It’s dominated by Chainlink ($10.6 billion market cap) and UMA ($1.2 billion market cap). Obviously, these are bound to grow as the space grows. The focus of this post, though, is on some smaller players which can make inroads into this largely less crowded space on the top. Personally, I think there’s a big gap in this space between the top 2 players and the rest. That gap is one waiting to be filled.
So here are four picks in this space that can grow big:
1. Oraichain Token (ORAI)
- Done a detailed post on this accessible here.
- ORAI is operating in a very niche area of integrating AI into Smart Contracts. One simple example here is, enabling face authentication in Smart Contracts. Imagine being able to check your balance, withdrawing tokens from your digital wallet, just by using face recognition.
- An experienced team lead by Dr. Chung Dao. The team just recently released some new initiatives around marketing. That’s always nice to see. All projects need eyeballs.
- Recently announced a partnership with Ocean Protocol.
- As per the roadmap, Q2 is going to be focused on acquiring customers. So that would be interesting to watch.
- At the current price of $35, ORAI stands at a market cap of $32 million. It’s 67% lower than what it was a month back when it touched its all-time high of $106. Been consolidating nicely around the current level.
- Expecting this to have a nice run given supportive market conditions
2. Umbrella (UMB)
- Another one I spoke of in a post last month when it was around $1.50. Has come off a bit since then and is currently trading at a price of $1.14.
- March has been a nice month for this project, despite the price not reflecting it. Been pretty much on a spree of partnerships this month: APYSwap, SpierDAO, AntiMatter, HashQuark, PolkaCover. It’s even announced a couple of listings: BitMax, ChainSwap. Besides, it also released its testnet.
- Again, an example to stress what Oracles do: Through its most recent partnership with APYSwap, Umbrella Network will provide APYSwap access to crypto-asset pricing data and yield calculations, of all the crypto assets they support.
- I think what’s playing out on this is what typically happens with new listings. There’s an initial hype that drives the price crazy. This touched an ATH of $2.62 in February. It has since come off quite a bit, which reflects the selling pressure from some early investors. Been respecting levels around the current price for a while. This could do a catching up game soon; again given supportive market conditions.
3. API3 (API3)
- Currently at $5.59, this has a higher market cap ($121 million) than the previous two and has been called by some as a Chainlink killer.
- In their words: API3 is a collaborative effort to build, manage and monetize decentralized APIs (dAPIs) at scale.
- They’ve got a strong team. This includes Heikki Vanttinen, a veteran in the segment of the language machine. There’s Burak Benligiray, former CTO at CLC Group and Honeycomb. The 3rd member of the core team is Saša Milić, who’s worked in software engineering (including a stint at Facebook), data science, research and teaching.
- Got a bunch of partnerships, you could check out here.
- A pretty strong community and has had calls from some decent number of influencers.
4. Bird Money
- A way way smaller sized projects. Currently at $172, it has a market cap of $15 million. Has a pretty small circulating supply. Has had an amazing run last three months. Come off a bit from its high of around $250.
- This goes a step beyond oracles and analytics. It even provides a lending platform.
- It aims to increase access to loans for DeFi users through Bird+ by analysing a user’s payment behaviour history in exchange for access to more loans. For this, it accesses information about an ETH account address, its transaction history and related digital assets.
- Again an experienced team with a mix of data scientists, engineers, blockchain developers. Details about the team are available here.
- They’ve got a beta version of their lending and off-chain oracle analytics in place. Staking and farming coming up. A pretty packed calendar. You can keep a track here.
As always, do your own research before getting into a project. The market currently has corrected quite a bit. Make use of technical analysis to check on entry points. Decide if you want to get into a position as a trader or investor and plan it accordingly. Remember, the crypto space is extremely volatile (as today proves). So invest an amount accordingly, preferable an amount that does not make you lose sleep.