In early August, the halo of the currency circle belonged to the oracle machine. LINK, BAND, NEST and other oracle machine tokens skyrocketed, leading a new round of carnival.
BAND rose by 261% in July, and NEST also rose by as much as 650.79% within a month. LINK even rose by more than $20, hitting a record high, and its market value once surpassed that of BCH, ranking fifth in the global market value.
But by late August, after experiencing a fantastic mania, the oracle market seemed to be returning to rationality, and the prices of related tokens began to pull back.
The prices of LINK and BAND dropped by 10%, and the price of NEST dropped by more than 20%. All of a sudden, the voices of bad-mouthing oracle machines came and went.
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LINK leads the way, and the oracle market is hot
From the beginning of March to the beginning of August, the price of ChainLink’s DeFi token LINK, a decentralized oracle machine, rose from a low of $1.366 to $14.414, an increase of 955%, with an average monthly increase of 191%, and a price increase of more than 10 times within the year.
ChainLink is the first decentralized oracle (oracle) network that allows anyone to securely provision smart contracts, access critical external data, offline payments and any other API functionality. Any user who has a data feed, an offline service like native payments, or any other API can provide it directly to a smart contract in exchange for LINK tokens.
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Blockchain oracle and DeFi
LINK, BAND, and NEST are all blockchain oracle tokens, so what exactly is a blockchain oracle? And why is it associated with DeFi?
In fact, the oracle project has appeared as early as 2015, but there have been few people interested in it. Recently, with the skyrocketing of Chainlink and the rise of the DeFi market, it has attracted more and more attention.
The main thing that the oracle machine does is to process the requests provided by the smart contracts in the blockchain, and transfer some information and data outside the chain to the chain. You can understand it as an oracle that links the world outside the blockchain with the blockchain, and writes external data into the blockchain. At present, the oracle is the only interface that links the blockchain and the real world.
Judging from the current oracle market, it is mainly divided into two types: indirect oracle and direct oracle. The former forms oracle data through distributed nodes "feeding data" to contracts on the chain; the latter directly generates prices on the chain through bilateral quotations by miners and arbitrage by verifiers.
Oracles such as Chainlink and BAND are "indirect" oracles, and their price feed nodes are just porters of price data, passing off-chain price data to on-chain contracts.
NEST is a price oracle machine, which directly forms a price on the chain through the bilateral quotation of distributed miners, and then makes it available for downstream DeFi calls. It is a direct oracle machine.
An efficient and practical DeFi protocol basically uses oracle machines to provide market information sources. The project party needs to pay for each query information and call data, so the oracle machine project will also benefit from this. The oracle machine is essential for DeFi few.
It can be generally understood that the oracle machine is like a bridge and link connecting the DeFi world with the real world, and ultimately guarantees its security and interoperability.
In application scenarios such as lending, insurance, and financial derivatives transactions involved in DeFi projects, oracles are needed to safely connect real-world data with the blockchain system, helping smart contracts connect real-world data, and realizing district The blockchain world interacts with real-world data.
Because most DeFi projects require oracles, their ecosystems need to rely on oracles to connect on-chain DeFi smart contracts to off-chain data sources to obtain data such as commodity and cryptocurrency prices.
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After the oracle mania, where is the next opportunity?
At the "POW'ER 2020 Technology and Application Summit" held last week, Wang Feng, the founder of Mars Blockchain and Consensus Lab, believes that in the next 1 to 2 years, the number of DeFi users will account for 10% of the global digital asset users , DeFi will become the largest concept sector in the field of digital assets.
Meng Yan, deputy director of the Digital Asset Research Institute and founder of the Token Thinking Lab, also asserted: DeFi will become the earliest and most successful application of the blockchain, not one of them.
The oracle machine is one of the basic tools of the DeFi ecosystem. Lending, derivatives, and even transactions are inseparable from the oracle machine. Without oracles, the DeFi ecosystem cannot be maintained.
This is why the price of oracle tokens such as LINK, BAND, and NEST can remain high in the hot DeFi market. But can the popularity of oracles last?
In fact, after entering the second half of August, the prices of oracle tokens such as LINK, BAND, and NEST have already begun to correct, and the range is not small.
According to non-small data, as of August 19, the price of LINK was US$15.41, which has fallen by nearly 20% from the highest point; the price of NEST has also fallen from the highest point of US$0.2014 to the current US$0.1002, a drop of more than 50%.
The price of oracle tokens began to fall, which is actually predictable. After all, rising and falling are the normal state of the currency circle. In addition, there may be other reasons for the price correction.
First of all, the current oracle project is not particularly mature, and its practicability is also poor. The maturity and long-term value of the project have yet to be tested.
Secondly, under the stimulation of LINK, all kinds of so-called oracle projects have also come out to bluff and deceive, disrupting the ecology and causing a bad impact on the market.
Finally, the "rise" of the oracle is due to DeFi, but the current popularity of DeFi has caused the Ethereum network to be extremely congested, which has made the cost of using the oracle very high, and the availability has continued to decline.
However, it seems that the DeFi market is still hot and has huge potential. The oracle machine, which is closely related to the DeFi ecology, is not without the possibility of taking off again.
After the concept of oracle machine is gradually recalled, what is the next opportunity? Is it NFT? Or is it DAO?
For investors, no matter whether it is an oracle machine, NFT, or DAO, only by keeping a calm and rational judgment at all times and not blindly following the trend can they avoid becoming leeks.
