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The "oracle problem" is the reason why I lost interest in crypto after the 2017 boom, when I really got into the nitty-gritty of crypto. The trust built into c

The "oracle problem" is the reason why I lost interest in crypto after the 2017 boom, when I really got into the nitty-gritty of crypto. The trust built into crypto is rock solid, the problem is that it's scope is so narrow and limited that even after a decade it's still searching for a major trust problem to solve. In this case you cannot reverse crypto payments because there is no oracle that can do it. You would need to find God's own API for reality. I was however totally wrong about the future (monetary) value of crypto in early 2018. I guess sometimes it pays more to know less. Edit: Also of course every single crypto org obfuscates and is opaque as possible about the oracle problem. I'd venture that most investing in the space don't know what it is.

tomatowurst 5y ago
Same here but I had a much more cynical view of the oracle issue that it is by design aimed at eventual and total financial destruction of most participants. This cynicism were fueled further by the ideology that justified this for some great adoption that was promised even further back. You can have decentralized systems but because monetary wealth accumulation is centralized by nature, and any decentralized system that introduces monetary accumulation and inflation reverts to a centralized state. A good example of this is Bitcoin. Those with the most liquid currency (fiat) can buy more hardware that centralizes wealth. You simply cannot have an MLM scheme without a pyramid.
- cinntaile 5y ago
  > it is by design aimed at eventual and total financial destruction of most participants. Your entire post is about inevitable centralization but that is not the oracle problem. The oracle problem is about providing access to real life data on the blockchain, but the issue is that you still need to trust someone to provide that data. Maybe I am misunderstanding you but I don't get how that by design leads to the total financial destruction of most participants?
  - MrMan 5y ago
    in my opinion oracle problem necessitates more middlemen to act as data / truth providers and of course they will have to be paid, and will impose an information bottleneck which they will leverage. this is centralization to me.
imtringued 5y ago
The obvious problem with Blockchains is that they can only manipulate things that exist inside of them. This means even something as basic as the interaction between blockchains is troublesome.
biztos 5y ago
There is a lot of “hidden oracle” going on in the upstart “level one” blockchains too, hidden in the sense that an outsider would never guess that’s part of the deal. I find it kind of fascinating to, for (made-up) example, place real-money bets not on the future of the price of gold but on what the contract at $ADDRESS will say it is in the future. Do people understand what they’re actually betting on?
- kristjansson 5y ago
  That’s an interesting comparison, since that’s basically the game commodities traders are playing. Guess the price of oil (of this specific type for delivery at this specific place and time that generally - but not necessarily - align with an idealized “price of oil). I suspect deep understanding and clever interpretations of those specifics in crypto will be rewarded. Though crypto has the added excitement that, as here, poor understanding and interpretation result not just in loss of value but it’s destruction!
- dcolkitt 5y ago
  The vast majority of gold speculation (well before blockchains existed) is not based on the actual price of gold, but rather what $EXCHANGE says is the price of gold. Very few gold investors are holding physical gold.
  - cuteboy19 5y ago
    The actual spot price varies city to city and even dealer to dealer, just like any other physical commodity. But because gold is relatively liquid it is unlikely that this difference is too big, otherwise it allows for an arbitrage opportunity
dcolkitt 5y ago
Agree and disagree. Yes, you’re right that in many cases you have to rely on an external oracle, so a protocol can’t be fully “trustless”. However the difference is that we can abstract away the oracle from the rest of the value transfer mechanism. For example if we want to bet on the winner of the Super Bowl, in the old days we’d have to find a trusted third party to hold the money for us. Essentially a bookie. Finding a trusted bookie, especially one who’s licensed in multiple jurisdictions is really hard. In contrast, we can probably find a trusted “oracle” for the Super Bowl much easier. For example AP is extremely trustworthy (largely because they’re not in the legally dodgy business of sports betting). As long as AP cryptographically signs the outcome of the game (as they do for all HTTPS served content), we now have a highly trusted oracle. We can handle all the other mechanics around betting and payoffs inside a trustless smart contract. In fact we can take this even a step further and use multiple trusted sources in a multisig setup. The chance that AP, ESPN, NBC sports and Google all collude to lie about the Super Bowl is extremely small. So while the oracle problem means we can’t completely eliminate the need for trust, it can drastically reduce the surface area of risk by abstracting away the informational layer from the value transference layer.
- imustbeevil 5y ago
  > Finding a trusted bookie, especially one who’s licensed in multiple jurisdictions is really hard. Anywhere that it is legal, it is significantly easier than dealing with any blockchain. What you've stumbled upon is the reality that the only feature cryptocurrencies provide is opaque law enforcement, and that feature has a timer. Why would it be any easier for a blockchain to be licensed in multiple jurisdictions? The only difference is that the blockchains are almost definitely not licensed. I'm not sure what the statute of limitations is, but I feel like a blockchain holding accounts of illegal gambling is a pretty weird thing to want to create immutable records of, unless you're the FBI.
- Workaccount2 5y ago
  The problem is that it inherently places an ever growing bounty on corrupting those "trusted" sources which are in fact human, not cryptographic. The bounty in crypto is only in cracking whatever chosen cryptography, and this is the very heart of crypto's provably rock solid trust. This bounty is worth trillions, but we known with a (very) high level of certainty that no one can claim it. You would have to have broken cryptography, or developed a sci-fi level computer chip in total secret. How much can you trust a handful of news sources when the bounty for gaming them reaches the billions or hundreds of billions in value? What kind of person suddenly wants to become an editor when they get to wear one of the rings of power? (sorry I've been reading LOTR lately) There is a simple calculus here (and everywhere) that shows that as the value of trust grows, so does the value of breaking that trust. Crypto solves this by making the cost of breaking that trust far outside human's capability. It probably would be be asking too much to introduce an element that suddenly makes that cost practically obtainable compared to cracking crypto.

tomatowurst 5y ago

Same here but I had a much more cynical view of the oracle issue that it is by design aimed at eventual and total financial destruction of most participants. This cynicism were fueled further by the ideology that justified this for some great adoption that was promised even further back. You can have decentralized systems but because monetary wealth accumulation is centralized by nature, and any decentralized system that introduces monetary accumulation and inflation reverts to a centralized state. A good example of this is Bitcoin. Those with the most liquid currency (fiat) can buy more hardware that centralizes wealth. You simply cannot have an MLM scheme without a pyramid.

cinntaile 5y ago
> it is by design aimed at eventual and total financial destruction of most participants. Your entire post is about inevitable centralization but that is not the oracle problem. The oracle problem is about providing access to real life data on the blockchain, but the issue is that you still need to trust someone to provide that data. Maybe I am misunderstanding you but I don't get how that by design leads to the total financial destruction of most participants?
- MrMan 5y ago
  in my opinion oracle problem necessitates more middlemen to act as data / truth providers and of course they will have to be paid, and will impose an information bottleneck which they will leverage. this is centralization to me.

imtringued 5y ago

The obvious problem with Blockchains is that they can only manipulate things that exist inside of them. This means even something as basic as the interaction between blockchains is troublesome.

biztos 5y ago

There is a lot of “hidden oracle” going on in the upstart “level one” blockchains too, hidden in the sense that an outsider would never guess that’s part of the deal. I find it kind of fascinating to, for (made-up) example, place real-money bets not on the future of the price of gold but on what the contract at $ADDRESS will say it is in the future. Do people understand what they’re actually betting on?

kristjansson 5y ago
That’s an interesting comparison, since that’s basically the game commodities traders are playing. Guess the price of oil (of this specific type for delivery at this specific place and time that generally - but not necessarily - align with an idealized “price of oil). I suspect deep understanding and clever interpretations of those specifics in crypto will be rewarded. Though crypto has the added excitement that, as here, poor understanding and interpretation result not just in loss of value but it’s destruction!
dcolkitt 5y ago
The vast majority of gold speculation (well before blockchains existed) is not based on the actual price of gold, but rather what $EXCHANGE says is the price of gold. Very few gold investors are holding physical gold.
- cuteboy19 5y ago
  The actual spot price varies city to city and even dealer to dealer, just like any other physical commodity. But because gold is relatively liquid it is unlikely that this difference is too big, otherwise it allows for an arbitrage opportunity

dcolkitt 5y ago

Agree and disagree. Yes, you’re right that in many cases you have to rely on an external oracle, so a protocol can’t be fully “trustless”. However the difference is that we can abstract away the oracle from the rest of the value transfer mechanism. For example if we want to bet on the winner of the Super Bowl, in the old days we’d have to find a trusted third party to hold the money for us. Essentially a bookie. Finding a trusted bookie, especially one who’s licensed in multiple jurisdictions is really hard. In contrast, we can probably find a trusted “oracle” for the Super Bowl much easier. For example AP is extremely trustworthy (largely because they’re not in the legally dodgy business of sports betting). As long as AP cryptographically signs the outcome of the game (as they do for all HTTPS served content), we now have a highly trusted oracle. We can handle all the other mechanics around betting and payoffs inside a trustless smart contract. In fact we can take this even a step further and use multiple trusted sources in a multisig setup. The chance that AP, ESPN, NBC sports and Google all collude to lie about the Super Bowl is extremely small. So while the oracle problem means we can’t completely eliminate the need for trust, it can drastically reduce the surface area of risk by abstracting away the informational layer from the value transference layer.

imustbeevil 5y ago
> Finding a trusted bookie, especially one who’s licensed in multiple jurisdictions is really hard. Anywhere that it is legal, it is significantly easier than dealing with any blockchain. What you've stumbled upon is the reality that the only feature cryptocurrencies provide is opaque law enforcement, and that feature has a timer. Why would it be any easier for a blockchain to be licensed in multiple jurisdictions? The only difference is that the blockchains are almost definitely not licensed. I'm not sure what the statute of limitations is, but I feel like a blockchain holding accounts of illegal gambling is a pretty weird thing to want to create immutable records of, unless you're the FBI.
Workaccount2 5y ago
The problem is that it inherently places an ever growing bounty on corrupting those "trusted" sources which are in fact human, not cryptographic. The bounty in crypto is only in cracking whatever chosen cryptography, and this is the very heart of crypto's provably rock solid trust. This bounty is worth trillions, but we known with a (very) high level of certainty that no one can claim it. You would have to have broken cryptography, or developed a sci-fi level computer chip in total secret. How much can you trust a handful of news sources when the bounty for gaming them reaches the billions or hundreds of billions in value? What kind of person suddenly wants to become an editor when they get to wear one of the rings of power? (sorry I've been reading LOTR lately) There is a simple calculus here (and everywhere) that shows that as the value of trust grows, so does the value of breaking that trust. Crypto solves this by making the cost of breaking that trust far outside human's capability. It probably would be be asking too much to introduce an element that suddenly makes that cost practically obtainable compared to cracking crypto.