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"In the world of DeFi (decentralized finance), oracles play a crucial role in ensuring the accuracy and reliability of data - especially pricing data - used within various protocols and platforms. A price oracle is a specific type of oracle that provides off-chain (external) price information to on-chain (blockchain) smart contracts. Given the isolated nature of blockchains, smart contracts cannot access external information directly, and oracles serve as a bridge to bring this external data onto the blockchain."

Oracles are lines of code that connect information in the real world to contracts and other agreements on a blockchain. They serve as a bridge between on-chain, which is every interaction that occurs on the blockchain, and off-chain data. While oracles solve one problem for blockchains, giving them access to real-world information, they create another in the form of centralization. Decentralized oracles solve the off-chain data problem by granting blockchains access to real-world information without introducing a single point of failure. They do this by using distributed data sources to avoid single points of vulnerability.

Ripple Labs received a patent for a smart contract that can use oracles to connect a distributed platform to a variety of different real-world data. Originally filed in June 2018, one example of a use case provided includes using the smart contracts to automatically settle options contracts when pre-agreed conditions are met, such as a company's debt-to-equity ratio hitting a certain threshold. Another example, for the oil industry, is feeding data on the density of a specific crude oil shipment to help a smart contract determine whether to make a trade. http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&p=1&u=%2Fnetahtml%2FPTO%2Fsearch-adv.htm&r=1&f=G&l=50&d=PALL&S1=10,789,068&OS=10,789,068&RS=10,789,068

"Smart contracts are self-executing programmable contracts between two or more parties. Smart contracts do not require a vetting authority because their legitimacy relies on decentralised ledger technologies. However, the implementation of many potentially useful smart contract applications depends upon verifying that some real-world event has taken place. This is a problem. Given its fully decentralised nature, how does a smart contract select what the true state of the world is? We show that truthful reporting about the realization of a publicly observed event cannot be implemented as a unique equilibrium in a completely decentralized environment. Our work provides a theoretical underpinning of the need for oracles and the related oracle problem."

Oracle has partnered with Vottun, a company that specializes in the certification and traceability of data on the blockchain, to release a digital health passport that could enable employees currently in lockdown to go back to work.  The digital credentials system - known as an 'Immunity Passport' - created by Vottun records your immunity status on the blockchain which can easily be checked.

Algorand plans to achieve a carbon-negative network by implementing a "sustainability oracle" in partnership with ClimateTrade in a move that could make blockchain adoption more environmentally friendly. The partnership enables Algorand to notarize its on-chain carbon footprint and then lock the equivalent amount of carbon credits into a so-called green treasury.

"At the end of the day, all this uncertainty about the possible outlawing of stablecoins, unsustainable yield-farming initiatives powered by token printing, smart contract risk, oracle risk, utility of DeFi apps if stablecoins are not allowed, increased competition from EVM-compatible chains like Binance Smart Chain and RSK, and many other aspects of the Ethereum economy trickles down to the underlying ETH asset itself, which has the compounding impact of making ETH less useful as money and, therefore, less useful as collateral."

Polkadot is a blockchain protocol connecting multiple specialized blockchains into one unified network. Polkadot is built to connect and secure unique blockchains, whether they be public, permission-less networks, private consortium chains, or oracles and other Web3 technologies. It enables an internet where independent blockchains can exchange information under common security guarantees. The network has an advanced suite of governance tools and, using the WebAssembly standard as a "meta-protocol", can autonomously deploy network upgrades. https://wiki.polkadot.network/docs/en/getting-started

DeFi Money Market (DMM), one of the earliest projects aiming to bring real-world assets on-chain, has ceased operations as a result of U.S. Securities and Exchange Commission (SEC) inquiries. Users deposit DAI, USDC, USDT, or ETH to the DMM smart contract in exchange for DMM mTokens that offered over 6% interest rates on the real-world car loans that backed them. DMM runs off a custom-built Chainlink oracle. The SEC subpoena requested information about the mTokens (DMM's interest earning stable coin tokens), the DMG governance tokens, and other details surrounding DMM's operations and governance.

Arbol, a platform that allows farmers to hedge weather risks, is integrating Chainlink data oracles. With blockchain, settlements and payouts can be instant, whereas in the centralized world, participants may have to wait weeks, if not months. Farmers can hedge against various adverse weather conditions having a negative impact on their crops. They can buy a hedge - for example, if a temperature in their region reaches a critical level, which will trigger an automatic payout. By adding Chainlink's oracalized weather data feeds, the company's platform has become more decentralized and resilient.

The Bank of Canada published a paper that uses a simple stylized model of collateralized lending to analyze the value proposition and limitations of decentralized finance (DeFi). DeFi uses a decentralized ledger to run smart contracts that automatically enforce the terms of a lending contract and safeguard the collateral. DeFi can lower the costs associated with intermediated lending and improve financial inclusion. Limitations are the volatility of the crypto collateral and stablecoins used for settlement, the possible incompleteness of smart contracts and the lack of a reliable oracle. A proper infrastructure reducing such limitations could improve the value of DeFi.

"I think banks should be able to issue dollar IOUs on whatever digital substrate they see fit, whether that be an Azure SQL database, an Oracle database, or a blockchain. And they should be allowed to get deposit insurance for any of those dollars, regardless of the substrate on which those dollars are recorded. The medium should be irrelevant."

ZK-proofs still face challenges. They can't work in isolation. They still need to be attached to a truth source or "oracle." Doubts about computational complexity, usability and scalability remain as well.  But if these hurdles are surmounted, ZK-proofs could offer a 21st-century solution to not only the "fake news" challenge but also the privacy quandary as with CBDCs, providing just enough anonymity for users to comfortably use state-issued digital money but enough accountability so governments can be assured fraudsters or money launderers aren't infiltrating their networks.

Can investors obtain better protection when crypto firms fail if activities migrate from centralized crypto entities to DeFi protocols? Decentralization provides some clear benefits to investors, by preventing misuse of customer funds and providing more transparency surrounding data and code. Governance procedures are also more transparent, though voting power can be highly concentrated and thus subject to manipulation. Moreover, the technology in DeFi allows different types of financial services to interact with few frictions. For instance, a flash loan allows users to simultaneously (or atomically) conduct and fund an arbitrage trade-something that would not be possible on a centralized platform. However, the technology also facilitates the creation of excessive leverage due to the repeated use of the same collateral for borrowing and lending. Further, bugs in smart contract codes, as well as hacks to oracles and smart contracts, resulted in an estimated loss of more than $1.3 billion in 2022:Q1. DeFi protocols may also introduce novel legal risks. In particular, the legal obligations of DeFi platforms are often opaque, and users may have little recourse should they seek to modify a transaction as the parties involved are anonymous and may be located anywhere in the world.

The recently launched Empty Set Dollar (ESD) stablecoin is built to be the reserve currency of decentralised finance. It sidesteps the centralisation risk of USDC, USDT, and TUSD, avoids AMPL and BASED's death spirals, the 100+ percent collateralisation requirements of sUSD & DAI, and, most importantly, it integrates perfectly with existing DeFi protocols. The ESD protocol expands on the work of Basis.io, which voluntarily shut down before launch due to regulatory pressure on the team. https://www.emptyset.finance/