What Is the Difference between a Centralized and Decentralized Oracle Network?
A centralized oracle relies on a single entity to provide data to the blockchain, creating a single point of failure and a high risk of manipulation. A decentralized oracle network (DON) aggregates data from multiple independent nodes and sources, using cryptographic and economic incentives to ensure accuracy and censorship resistance, significantly increasing security and reliability.
Glossar
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.
Centralized Oracle
Attestation ⎊ A centralized oracle, within the context of cryptocurrency derivatives and financial markets, fundamentally provides verifiable data feeds to smart contracts and trading systems.
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.