Flux protocol is a cross-chain oracle aggregator that prides itself in the provision of economically rich data feeds. Flux is an aggregator on two levels.
DeFi Growth in Just One Year
It’s no more news that blockchain now more than ever is tending more towards decentralized finance. The total Defi growth has been 83 Billion USD which is a 400% growth from 20 Billion a year ago according to Defipulse. Avalanche in the past few weeks announced a 230 Million investment in its Defi ecosystem to attract more D’apps and incentivize participants. This move was followed by many other blockchains that are seeking more participation. The fact is, there has been a huge growth in Defi. We cannot begin to unravel what the contribution of NFTs has been in the past year in terms of locked value. Even though NFT growth is debatable, the glaring truth is that many established companies, football clubs, etc. are already pitching in.
Smart Contract- The Common Base
At the center of all DeFi and even NFTs is a common base- Smart Contracts. Smart Contracts is blockchain’s innovative way of creating a programmable ecosystem that allows many applications to be built on top of blockchains. Smart contracts are, to many non-coders like me ?, a bunch of code dictionaries- thousands of lines of codes and … annoying codes that take forever to understand ?. Let’s pipe down a little bit. But really… they are codes.
What are they?
The smart contract codes are simply combinations of IFs and THENs. Smart contracts are contracts that need no human intervention after being published. They are intermediate between two parties who wish to transact. All footprints of actions taken by parties involved are recorded immutably on the blockchain… IFs and THENs… get it?
On the Smart Contract Flipside…
Because Smart Contracts are codebases that are designed by humans, they are not ALL STRENGTH without WEAKNESSES. Loopholes in contracts present opportunities for hackers to take advantage of them to steal underlying funds. D’apps have found a way out of most of it through third-party code audits. The other part of smart contract loopholes that are still being exploited today is data connections that are off-chain.
Smart Contracts and Oracles
You see, smart contracts most of the time need data outside the blockchain to be able to make decisions (the ‘THEN’ aspect). A decentralized Automated Market Maker (AMM) needs the global price of tokens to close the arbitrage loopholes. A prediction app most certainly needs data outside a blockchain to validate the winner of a prediction game. Blockchain oracles make off-chain data available to smart contracts in an on-chain format.
Blockchain Oracle Challenges
This means that the validity of an oracle is not just crucial but core to even wider adoption of DeFi as illustrated above. But the problem is that there are too few blockchain oracles out there. Most blockchain oracles support only mainstream blockchains while newer smart contracts supporting blockchain make do with low-quality oracles.
First: Cross-Chain Data Availability
The truth is that: where DeFis and NFTs move on to, in terms of adoption, is going to be largely dependent on efforts in the blockchain oracle industry. That is very reasonable because smart contracts rely many times on data whose origins are not on the blockchain or whose origins are on a different blockchain. For example, a SUSHI trading AMM on a blockchain outside Ethereum will most need SUSHI price on Ethereum since a huge volume is being traded on Ethereum.
Second: Data Source
Another aspect of oracles that needs introspecting, since we have established that they are core to DeFi, is their security. An oracle is not efficient if it has a single source of answers when there are multiple sources available. A recent attack on an AMM on Avalanche blockchain (Vee Finance) happened because the oracle API used relied only on a single source of Data.
Criteria for Next-Gen Blockchain Oracles
The highlighted challenges above have set criteria or characteristics for a blockchain oracle that will thrive or deserve to be turned to. The oracle must first rely on multiple sources of data and be able to efficiently decide on which outcome is the best. It must be available across blockchains and be thoroughly tested.
Flux- Does it Answer the Challenge?
Flux protocol is a cross-chain oracle aggregator that prides itself in the provision of economically rich data feeds. Flux is an aggregator on two levels.
- It aggregates data from multiple sources. Its data provisioning processes allow for the selection of the most suitable data feeds for any request while neglecting outliers. Data requesters pay a bonding fee to make requests, this eliminates spam and ensures data requests are scrutinized before they are made to avoid bonding fee loss.
- It also aggregates oracles. The protocol takes the best of all “mainstream” oracles and makes them available for requesters even if the originating blockchain is different, so far the target blockchain is supported.
And you can be sure the protocol is expanding to every mainstream blockchain. Active testing is ongoing on Near protocol and more recently, support has been announced for Solana.
Data Requesters and Validation
As established, data requesters pay a bonding fee to request data. A well-written in-depth developer-friendly document has been written to help data requesters test the protocol on Near blockchain. The document is straightforward to understand.
Those who wish to validate data are also welcome on Flux protocol as they are also able to test the protocol before it launches. The protocol is not centralized, it depends on the work of multiple validators to keep the network secure. To ensure maximum security and integrity of validators, the protocol imposes a bonding fee for all validators who provide data feeds to data requests. If the answer or feed given by a validator is chosen, the validator earns the bonding fee for the request. In a case where a feed is disputed, there are resolution schemes achieved through voting.
Thoughts
Flux protocol unlike any other oracle system is dedicating enough time to testing its protocol across the different blockchains. The protocol raised a 10.1 Million USD seed round led by Distributed Global, with participation from Coinbase Ventures, Figment Capital, IOSG, etc. earlier this year. Bringing aggregation to the blockchain oracle industry is no small feat; only a serious project can swim in that kind of ocean. It sure deserves attention.
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Disclaimer!!!
This piece is NOT A FINANCIAL ADVICE. DYOR!!!
