[dlc-dev] Economic incentives for oracles

LE GUILLY THIBAUT thibaut at cryptogarage.co.jp
Thu Feb 18 09:06:37 CET 2021


Hi all,

I think monetary incentives for oracles is an important topic, and while
it's possible that some entities will be willing to run oracle
benevolently, it has a certain cost and having revenues would IMHO increase
the incentives for oracles to behave correctly. In addition, while some
types of oracle (for example based on data feed) are relatively easy to run
and maintain, other types might require manual interaction and thus have a
higher running cost.

First, I think that the most practical solution is as Chris mentioned a
paid API, where payment is done through Lightning or other means. One small
drawback of this approach is that nothing prevents re-selling of
signatures, which is of course already an issue for existing data
providers, but could be exacerbated if using anonymous payment (but again
this is still the most likely approach to be used in practice IMO).

That being said, I just want to lay out a random idea that I
had, which I call "Crowdfunded Oracles". It has a lot of issues, which
might or might not be solvable. My hope is mainly that it could trigger
better ideas in other people's minds and maybe lead to some nice proper
solution.

The idea would be that an Oracle (or set of Oracles) put a price on a
particular event. An escrow (for lack of better solution) then collects
money from users that would want to use that event for a DLC, and if the
price target is reached, the Oracle must release a signature for the event
outcome in order to receive the payment.

At an application level, how I could imagine it working is having the
ability for users to register temporary DLCs (with a better name) where the
application would automatically take a small percentage of the contract
collateral and send it to the escrow. If the target is reached, the DLC is
finalized and the fund transaction is broadcast. If not, then the user is
reimbursed and the DLC cancelled.

Now there are a lot of issues with this proposal (more than listed here or
even that I can think of I think), but if some or all of the below points
can be solved/answered, it might become an interesting idea:
* What is a temporary DLC? Is it possible to bind two users to a temporary
DLC, while still enabling them to escape it if the target is not reached
(in a reasonable amount of time)?
* Is there a way to make the payments to the escrow off-chain while still
enabling transparency on the amount of money that is/has been collected for
a single event (and preserving privacy of the payer)?
* Is there a way to collect funds in a transaction that could be released
by the oracle using the event signature (but nothing else)?

There are a lot of issues surrounding privacy of potential on-chain
payments to the escrow but I've skipped over them intentionally (as well as
the potential solutions to them).

Best,

Thibaut


On Sat, Jan 30, 2021 at 9:27 PM OB <ob at ratatat.uk> wrote:

> Hi Lipton. If oracles are paid then they can be corrupted with bribes.
> Consider bitcoin mining which aims to avoid that same potential for
> corruption of the validation authority signal via massive/permissionless
> replication of the role. I would anticipate that, just like in your
> example, established businesses would be willing to publish/attest to
> events via DLC as an almost inconsequentially low cost bolt-on to their
> primary businesses.
>
> As an example MarkIt are the authority on the Purchasing Managers Index
> against which they will have some licensing revenue for commercial use.
> They will also make that information public via many channels (website,
> Reuters, Bloomberg, Twitter, RSS, etc..) and may be willing to add on DLC
> to maintain the dominance of the index in the marketplace.
>
> I'm not following DLC discussions closely until now but I believe there
> are some more directly incentivised methods. If so that would expand the
> useful scope of DLC oracles however I'd be happy with the above as
> sufficient to make the tool useful.
>
> > On 30 Jan 2021, at 10:22, Lipton Tea via dlc-dev <
> dlc-dev at mailmanlists.org> wrote:
> >
> > Hey
> >
> > What are the economic incentives for oracles to maintain their
> reputation? An oracle in DLC does not know which (or even how many) users
> use them. I assume from this that it is not possible for an oracle to be
> rewarded financially for being used (getting a fee every time their
> signature is used to unlock a contract).
> >
> > So what are the incentives? Maybe maintaining good reputation of an
> associated business (e.g. exchange). Looks not very promising, because then
> why to become an oracle in the first place. Such an entity can not win
> anything, but can lose, so better not to participate.
> >
> > If this was discussed anywhere or if this mailing list is not a good
> place for such questions, please let me know.
> >
> > dlc-dev mailing list
> > dlc-dev at mailmanlists.org
> > https://mailmanlists.org/mailman/listinfo/dlc-dev
>
>
> dlc-dev mailing list
> dlc-dev at mailmanlists.org
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>
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