Oracle Machine Track Research: Re-examination and Future Outlook

With Vitalik recently mentioning the issue of the ultimate Oracle Machine in his article, oracles have once again become the focus of attention in the crypto community. Currently, oracles have demonstrated irreplaceable value in various fields such as insurance, finance, random prediction, and the Internet of Things. As long as off-chain data remains valuable, middleware like oracles will continue to play a key role in the entire Web3 ecosystem. This is mainly reflected in the following aspects:

1. With the continuous development of the Web3 ecosystem, the increasing number of dapps and platforms will drive the growing demand for Oracle Machine data source calls and APIs. In the future, dapps, especially DeFi exchanges, are likely to integrate multiple Oracle Machines, using one as the primary data source and 1-2 as backup for cross-validation, in order to obtain off-chain metadata and avoid significant losses caused by delays or attacks on a single Oracle Machine.

2. In terms of investment opportunities, although traditional DeFi field Oracle Machines, which focus on data feeding functions, find it difficult to break Chainlink's monopoly in the short term, there is still competitive space for a second place in the remaining approximately 10% of the market. Additionally, Oracle Machines in segmented fields such as L2, credit, NFTs, and DID have also seen noteworthy innovative protocols and narratives.

3. Based on the experience of DEX and L1, from the perspective of incremental market demand and L2/ZK as well as emerging scenarios, the Oracle Machine track cannot be monopolized by a single winner in the long run. There is greater development potential and market space worth exploring, such as off-chain computing scenarios, pricing of non-standard on-chain assets like NFTs, and the deep integration of AI/ML.

Oracle Machine Concept Interpretation

( Definition and Value

The Oracle Machine is middleware that provides reliable off-chain data services for blockchain projects. Its existence is due to the fact that the trust generated by the blockchain itself is currently insufficient to support all the needs of upper-layer applications, necessitating the injection of more trust by the Oracle Machine. Compared to the off-chain world with abundant data, the on-chain data volume is far from sufficient to support independent development completely away from off-chain.

The core problem solved by the Oracle Machine is not how to acquire information from the real world, but how to help the blockchain trust information coming from the real world. Trust is generated through communication, not just connection. The intrinsic value of the Oracle Machine depends on its ability to bridge the communication channels between on-chain and off-chain, injecting trust into off-chain data by forwarding, verifying, and filtering information.

![OKX Ventures' latest research report: Rethinking Oracle Machine, Seeing and Unseen])https://img-cdn.gateio.im/webp-social/moments-eb2cda29809972e75a9c4712ea44794a.webp###

( Category

It can be divided into software Oracle Machines and hardware Oracle Machines by form:

• Software Oracle Machine: Provides API/SDK and other services to access third-party server data.
• Hardware Oracle Machine: Widely used in IoT, such as electronic sensors and data collectors.

According to the data source, it can be divided into centralized Oracle Machines and decentralized Oracle Machines:

• Centralized Oracle Machine: Integrates data from a single trusted third party, with the advantage of high efficiency and the disadvantage of a single point of failure risk.
• Decentralized Oracle Machine: Obtains data from multiple external sources, more reliable and trustless.

) Application Scenarios

Oracle Machine is applied in various scenarios such as DeFi, NFT, GameFi, Social, DAO, and cross-chain.

• DeFi: provides price feeding, fair ordering, and other services
• NFT: Used for community airdrops, NFT price feeding
• GameFi: Generate random in-game scenarios
• Social: Build user profiles, user side profile
• DAO: Supports community airdrops, community governance
• Cross-chain: Achieve cross-chain information and asset transfer

![OKX Ventures Latest Research Report: Rethinking Oracle Machine, What is Seen and What is Not]###https://img-cdn.gateio.im/webp-social/moments-7a0791ea4e1614b138ab5523d6f005cc.webp###

Investment Opportunity Expectations

1. In the traditional DeFi Oracle Machine space, it is difficult to break Chainlink's monopoly in the short term, but there is still about 10% market competition space for the second place.

• Possible innovative consensus mechanism projects based on game theory, PoS/PoW.
• Or projects that have significantly improved cost-performance ratio, such as a notable reduction in feeding price.

2. There are potential opportunities for Oracle Machines in subfields such as L2, credit, NFT, and DID.

• L2 Oracle Machine needs to focus on low latency and security, mainly aimed at the high-frequency trading demands of derivatives.
• The credit Oracle Machine combined with on-chain credit expansion theory may trigger an explosion in the next cycle.
• The NFT Oracle Machine can explore off-chain valuation solutions combining AI/ML.
• DID identity Oracle Machine has long-term high value, but currently mostly centralized solutions.

3. Case Analysis:

• Redstone: Low-cost DeFi Oracle Machine, data permanently stored on Arweave
• HyperOracle: A ZK-based L2 Oracle Machine that provides unique zkAutomation services.
• CanDID: Decentralized identity infrastructure using MPC and ZK technology
• CreDA: Multi-chain AI-driven credit rating system
• Upshot: Provides real-time valuation and investment analysis of NFTs using Oracle Machine.

Overall, the Oracle Machine will still play an important role in the next cycle of the crypto space. There is greater development potential and market space in areas such as off-chain computation, non-standard asset pricing, and the combination of AI/ML, which are worth continuous attention.