On Elastic Incentives for Blockchain Oracles

A fundamental open question for oracles in blockchain environments is a determination of the amount of trust to be placed in the oracle. Oracles serve as intermediaries between a trusted blockchain environment and the untrusted external environment from where the oracles fetch data. As such, it is important to understand the uncertainty introduced by the oracle in the trusted blockchain environment and the implications of this uncertainty on blockchain performance. This paper develops a model for commoditization of trust. The model provides for dynamic trust environments that incorporates oracle selfishness. The work also considers the equilibrium behavior for the demand and supply for trust and introduces elastic incentives for increasing the trust. These results are used to determine optimum size of the network that can be served by an oracle with varying degrees of selfishness. Key consequences and challenges of incorporating oracles in trusted distributed ledger environments are presented.

Automated summary

This research develops a trust commoditization model for determining the amount of trust to be placed in oracles in blockchain environments, taking into account oracle selfishness. It also introduces elastic incentives for increasing trust to determine the optimum network size. Key consequences and challenges of incorporating oracles in trusted distributed ledger environments are discussed in the paper.