How Does a Decentralized Oracle Network Prevent a Single Point of Failure?
A DON prevents a single point of failure by distributing the data-sourcing and reporting responsibilities across a large number of independent, geographically diverse node operators. If one node fails or attempts to submit malicious data, the network's consensus mechanism ensures that the other honest nodes override the failure or attack.
This redundancy and decentralization ensure continuous, tamper-proof operation, unlike a centralized oracle which can be compromised by attacking one entity.
Glossar
Consensus Mechanism
Efficacy ⎊ : The mechanism's efficacy is measured by its ability to achieve agreement on transaction ordering and state transition while maintaining a high degree of decentralization and finality.
Single Point of Failure
Concentration ⎊ In crypto derivatives, this risk materializes when excessive collateral or governance control resides with a small number of entities, such as a few large liquidity providers or key developers.
Cryptographic Signatures
Authentication ⎊ Cryptographic Signatures provide the essential mechanism for authenticating the origin of a transaction or instruction on a distributed ledger, serving as the digital equivalent of a legally binding endorsement.
Decentralized Oracle Network
Network ⎊ A Decentralized Oracle Network (DON) facilitates secure and verifiable data feeds from external sources to blockchain environments, crucial for smart contract functionality within cryptocurrency derivatives and options trading.