What Is a ‘Decentralized Oracle Network’?
A decentralized oracle network (DON) uses multiple independent data sources and nodes to verify and aggregate external data before feeding it to a smart contract. This decentralization prevents a single point of failure and makes the data feed highly resistant to manipulation, solving the 'Oracle Problem.'
Glossar
External Data
Source ⎊ External Data, in the context of crypto derivatives, refers to information originating outside the native blockchain environment, which is essential for determining the value or triggering the settlement of a smart contract.
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.
Data Sources
Origin ⎊ Data sources in the context of financial derivatives refer to the primary venues from which raw market information is extracted, encompassing centralized exchanges, decentralized exchanges, and over-the-counter (OTC) desks.
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.