For the past year and a half, we’ve had the privilege to focus on building Daxia, a protocol for decentralized derivatives on Ethereum. In layman terms, a derivative is simply a financial contract betting on the future price of something. At its core, derivative contracts are a perfect use case for Ethereum and other decentralized networks; financial contracts that can live completely on-chain with no real-world collateralization. The problem that we, along with any other derivative, stable coin, or prediction market protocol, realized was that the security, decentralization, and accurateness of the protocol relied on the oracle, or the ability to input the price of some off-chain asset.
Our core belief is that the value proposition of decentralized blockchain networks is censorship resistance.
This means, that like other projects, the decentralization and security was of paramount importance and unfortunately none of the current solutions fit the bill. They were either one compromise away from decentralized integrity or required users embrace unnecessary complexity and integration costs. We sought something to implement and in turn found a huge pain point in the industry. We’ll cover this more in-depth in a future article.
Over the course of our own implementation challenges, we talked to other large market participants and the problem was (and still is) apparent. Talks of our solution and this product targeted the core problem of what they need and we’re all excited to see Tellor coming to life.
What Tellor should be
Tellor’s goal is to provide a secure method for inputting high value onto the Ethereum blockchain.
The ability to query off-chain data, perform off-chain computations, relay messages between blockchains or even be an ultimate source of truth for semi-ambiguous questions are all in the realm of potential duties of an oracle. The problem is that these are all open and separate research problems that are often combined into general purpose protocols that fail at providing a usable answer for any of them.
For us, we started doing derivatives and we’re starting by solving that focus. In financial contracts, you have large amounts of money riding on a few very high value data points. We don’t need speed, we don’t need the ability to request data from hundreds or thousands of APIs, and we don’t need non-specific data points. Our development is focusing on creating a protocol that is expensive to break and transparent about the exact amount where it becomes insecure.
To give an example of what Tellor can provide:
- ETH/USD price from several exchanges on a daily basis for stablecoin pricing
- BTC/USD price from several exchanges on a daily basis to enable Long and Short Bitcoin tokens on Ethereum
- S&P500 price to enable tokenized stock market exposure
- LIBOR rate on a weekly basis to provide settlement for decentralized OTC swap contracts
We’re excited about the possibilities and we’ll be building out these solutions in addition to working with partners to make decentralized finance a reality.
Why Tellor should be
We haven’t just built a cool piece of technology. We’re helping pave the path for decentralized applications.
We got into crypto because of the promise of ending the monopoly on money. For mankind’s entire history, we’ve had men debasing currencies to kill rivals, enrich well connected parties, or advance their own unsustainable agendas. Now we have a chance as a society to end that, and in our opinion, a functioning decentralized financial system is the next step to seeing this a reality. Crypto has already changed the world and we want to be part of the next big shift.
