Tellor Crypto: A Decentralized Oracle Network for Ethereum

Tellor is a blockchain-based decentralized oracle network that connects smart contracts on Ethereum to external data. It is secure, transparent, and designed for Ethereum decentralized applications with a focus on decentralized finance (DeFi). In this blog post, we will explore what Tellor is, how it works, and why it is unique among other oracle solutions.

What is an Oracle and Why Do We Need It?

An oracle is a service that provides off-chain data to on-chain smart contracts. Smart contracts are self-executing agreements that run on blockchains, such as Ethereum. They can perform various functions, such as lending, borrowing, trading, insurance, and more. However, smart contracts cannot access data outside of their own network, such as market prices, weather conditions, sports outcomes, etc. This limits their potential and usefulness.

To overcome this limitation, we need oracles that can bridge the gap between the blockchain and the real world. Oracles can fetch data from various sources, such as websites, APIs, sensors, etc., and deliver it to smart contracts in a reliable and verifiable way. This enables smart contracts to interact with the real world and create more complex and powerful applications.

How Does Tellor Work?

Tellor is an oracle network that uses a proof-of-work (PoW) consensus mechanism to secure and incentivize data reporting. Anyone can become a data reporter (also called a miner) by staking Tellor’s native token, TRB (also called Tributes), and running the Tellor software. Data reporters compete to provide data for various requests made by smart contract users.

When a user requests data from Tellor, they specify the data point they want (e.g., BTC/USD price), the amount of TRB they are willing to pay for it (called a tip), and the minimum number of data reporters they want to provide the data (called a quorum). The user also pays a small fee in ETH to cover the gas costs of submitting the request to the Ethereum network.

The request is then added to a queue of pending requests on Tellor. Every 10 minutes, the Tellor software selects five requests from the queue based on their tips and assigns them to a challenge. The challenge consists of a PoW puzzle that data reporters have to solve using their computational power. The first five data reporters who solve the puzzle submit their data along with their PoW solution to the Tellor contract. The median of these five values is then stored on-chain as the official value for the request. The data reporters who submitted valid data are rewarded with newly minted TRB tokens and a share of the tips from the requests.

Tellor also has a dispute mechanism that allows anyone to challenge the validity of the data submitted by data reporters. If someone thinks that a data reporter submitted incorrect or malicious data, they can stake TRB tokens and initiate a dispute. The dispute is then voted on by a jury of TRB token holders who have locked their tokens in Tellor’s governance contract. If the dispute is successful, the data reporter who submitted the faulty data loses their stake and gets slashed, while the disputer gets rewarded with their stake and a portion of the slashed tokens. If the dispute is unsuccessful, the disputer loses their stake and pays a penalty to the data reporter who submitted the valid data.

What Makes Tellor Unique?

Tellor has several features that make it stand out among other oracle solutions:

• Decentralized and permissionless: Anyone can become a data reporter or a user of Tellor without any verification or registration process. This makes Tellor more open and accessible than centralized oracles that rely on trusted third parties or whitelisted nodes.
• Secure and transparent: Tellor uses PoW to secure its network and ensure honest data reporting. PoW makes it costly and difficult for malicious actors to manipulate or attack the network. Moreover, all the data requests, submissions, disputes, and votes are recorded on-chain and visible to everyone. This makes Tellor more transparent and auditable than oracles that use off-chain or hidden processes.
• Flexible and robust: Tellor allows users to request any type of data in any format from any source. Data reporters can use any method or tool to fetch and submit data as long as they follow the protocol rules. This makes Tellor more flexible and robust than oracles that are limited by predefined or standardized data feeds.

Conclusion

Tellor is a decentralized oracle network that aims to provide reliable and verifiable off-chain data to Ethereum smart contracts. It uses PoW to secure its network and incentivize data reporting, while also allowing disputes and governance by TRB token holders. Tellor is designed for Ethereum decentralized applications with a focus on DeFi, where accurate and timely data is crucial for their functionality and security.