Oracles connect the on- and off-chain worlds, providing blockchains with access to real-world data. However, past cases of exploits due to oracle manipulations remind us that the usage of oracles can introduce trust and reliability concerns.
By eliminating dependency on oracles, oracle-less protocols can help projects combat price manipulation, increase self-reliance, and save on oracle-related costs.
To understand how oracle-less protocols work, we examined several projects across the lending, derivatives, and non-fungible tokens space. We have observed creative workarounds to facilitate pricing, liquidation, and other mechanisms, without relying on oracles.
While oracle-less protocols offer an alternative to the existing landscape dominated by oracles, there are trade-offs relating to complexity, efficiency, and design constraints that need to be considered.
Looking ahead, we believe that there exists sufficient room for both oracle-less and oracle-dependent protocols to thrive. Given the trade-offs associated with each solution, developers and users may find different use cases in which one solution is more appropriate than the other.
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