“A dream you dream alone is only a dream. A dream you dream together is reality.”

― John Lennon

In the post before, we defined Oracles Network as an open, public, permissioned network based on Ethereum protocol with Proof of Authority (PoA) consensus, reached by independent pre-selected validators. By PoA we mean a modified Proof of Stake, with identity used as a form of stake, which incentivizes validators to act in the interest of the network. In any project, however, what’s more important than definitions is the answer to WHY the project exists in the first place. In this post, we will describe why we are building Oracles Network and how it finds its place in the blockchain smart contracts universe.

To answer WHY, we will first zoom in and take a closer look at what’s under the hood. We will examine the parts of the structure that the Oracles Network R&D team has been developing for the last eighteen months. After that, we will zoom out to see how this inner structure enables the broader purpose.

Consensus by Individuals as Business Model for Blockchains

In the last couple years, blockchain technology has demonstrated a number of potential applications: from enabling completely new business models to simplifying our daily routines. Without a practical path to implementation, however, all innovation resembles a theoretical exercise.

It is especially true when such innovation is not directly related to consumer-facing applications, but involves protocol changes. We have witnessed the creation of multiple siloed chains that were not compatible with each other and required months before they could even launch. This made the “Not another chain!” comment a staple in community forums. The arrival of the interledger protocol brought a promise of connecting various chains to communicate and transfer value. But it did not make it simpler, cheaper, or faster to run smart contracts or to implement blockchain technology for small and medium businesses.

As a result, such businesses are left with a few options. First, they could build their services on top of existing expensive public networks. Execution of this option, from start to finish, would require the allocation of significant resources. Second, they may try to build their own private blockchains. That would give some bragging rights to the business founder, but in reality would represent a structure no different than just a database. Third, they could just keep the status quo and miss out on the blockchain’s opportunities. The bottom line is that open public blockchain networks are still out of reach to businesses with which we interact on a daily basis.

Can there be a cheaper solution that would allow small and medium businesses (SMBs) to take advantage of blockchain technology without having to divert a significant portion of their resources to it?

At Oracles Network, we are making the case that consensus by individuals is a feasible business model for blockchains. A streamlined consensus algorithm that creates a trustless environment without an expensive setup, combined with a swarm of blockchains, connected to each other to transfer value, can establish a foundation for faster and cheaper smart contracts. This will ultimately open the doors to the crypto world to many businesses. Making open networks more affordable and accessible to SMBs is the crucial step we need to make for broad blockchain adoption.

Oracles Network Ecosystem

Zooming in…

Let’s first look under the hood of Oracles Network — we call it “Oracles Network Core”. Oracles Network Core consists of the PoA-based protocol, the validators who seal the blocks according to the rules of this protocol, and the DApps that enable the network functionality.

Oracles Network adopts the best practices of the Ethereum protocol but, nevertheless, is an independent chain with its own native coin. Instead of current PoW or soon-to-be implemented PoS, Oracles Network uses consensus established by the reputation of verified and known individuals. A blockchain established on such protocol with consensus by private actors on public duty makes smart contract creation and execution cheaper and faster.

The idea of consensus by known individuals raises two questions: 1. How can a small group power the entire network? 2. How can a few people be ensured to act in the interests of the network?

To address the first question, we need to acknowledge a certain bias that the PoW-based consensus creates in our minds. As the most popular consensus mechanism requires a lot of computing power to function, we kind of expect that to be the case for any network. However, since the validators in the PoA network are not solving complex mathematical tasks, the computing requirements to them are pretty lightweight. There is no need for specialized equipment, aside from high-speed reliable internet connectivity.

To address the second question, consensus by a few trusted people in PoA is far from a novel concept. Take DPoS, for example, where select delegates are chosen by the stakeholders to represent them. Establishing a group of trusted parties is possible not only by having them stake their funds, but also by having them stake their identity. While the same size monetary stake has different value for different actors, depending on their overall wealth, own identity is valued by everyone pretty much the same. We believe that Identity at Stake setup can establish the incentives in such a way that the only course of action, which makes sense, would be acting in the interests of the network.

As we described before, the validators need to have their identities known and verified. We achieve that by requiring them to have an active public notary. Why public notary? Because this allows us to take advantage of the existing system providing information about a validator in the public domain. For example, you can go here and get the addresses of all the notaries in the state of California.

This serves a number of purposes. At a minimum, public notary certification means that a person has passed a test that he or she is of good morals and has no criminal record. More importantly, should things go wrong, the suffering party to a transaction knows who validated that block and has the means to go after the validator. In fact, the validators on the core Oracles Network are required to sign a legal agreement, making them liable for willful misconduct and fraud, regardless of what technology has been used in the process. The agreement formalizes on-chain governance, allowing other validators to terminate “bad guys” or fork the network if a validator or a group start acting nefariously (due to collusion or as the result of someone hijacking a good validator’s node).

Lastly, why should a user of Oracles Network in Australia even care about public notary? That certification means absolutely nothing to them. And it should not. What’s important is what that certification means to a validator, who now stakes their identity to secure the network. The fact that validators know that they are under observation and their mistakes will be visible and cost them the right to validate the network makes them act the way they are expected to act. This enables an incentives model where you don’t need to personally trust a validator, but the setup will still work and self-cure should things go wrong. A rational validator understanding that his or her information is publicly available is better off acting in the interests of the network than cheating the system.

To establish these rules, Oracles Network uses DApps that initiate the network. The Ceremony DApp allows for distribution and exchange of the keys necessary for the validation on the network. The Governance DApp establishes on-chain governance. The Validators DApp provides the information on the validators.

By using these DApps, anyone can initiate a public or a private PoA-based network with any set of validators, specific to an industry or a community. These networks will support any DApps run on Oracles Network. Similarly, the validators for Oracles Network can also secure other PoA-based networks, introducing the concept of “consensus-as-a-service”.

This kind of replicability is the foundation of the horizontal scalability concept we introduce.