Oracles like Chainlink, BAND, and Tellor appear to be seeing an increase in demand. For example, yesterday within one hour, the price of BAND surged from $5.6 close to $8. What are the reasons for the recent success of oracles?
The Oracle Boom
On the first of July 2020, I have published my post "Tellor vs. Band Protocol - The Clash Of Oracles For Decentralized Finance". I explained in this post why I think that BAND and Tellor are probably a good investment. That was about one month ago.
Tellor`s price that day was $6.98 and BAND`s price that day was $1.12.
Tellor`s price today is $19.69 and BAND`s price today is $7.89.
The same applies to Chainlink (LINK). LINK`s price has seen a new all-time high few days ago.
Chainlink (LINK), Band Protocol (BAND), and Tellor (TRB) are so-called Oracles. Oracles are bringing real-world information to smart contracts. They are acting as an intermediary between blockchain smart contracts and traditional non-blockchain applications such as website APIs, databases, and payment processing systems. Information can also be returned from the smart contract.
So in fact, there are several notable projects that are working on connecting off-chain data and systems with the decentralized world.
Oracles and DeFi
Blockchains don’t have access to information that is not on-chain. When it comes to Decentralized Finance this typically means price data that is used by smart contracts to control key aspects of their lending protocols. Oracles are critical to the success of all DeFi applications because all Decentralized Finance applications need price feeds on token swap and loan collateralization process.
This urgent need in DeFi is exactly what makes oracles so precious.
DeFi projects technically could also make their own oracles but it requires time and resources to develop them.
As we see the DeFi market rapidly expanding, we can see that the demand for oracles is also increasing accordingly. For example, within the last month, the total value locked in DeFi protocols increased from $1.04 billion to $4.47 billion.
Decentralized projects are the ones that I believe stand to make significant gains and provide very interesting passive income opportunities over the coming years. It`s like in the early days of Bitcoin mining in my opinion.
This deep connection with DeFi is the reason for the strong performance of all three oracles.
My Final Conclusion
I am still a huge fan of Chainlink and I have it also in my portfolio. I also bought some Tellor and Band Protocol about six weeks ago and it was a good decision. Tellor and Band made much bigger gains because of their current small market caps. I think the boom hasn`t stopped yet and oracles are still a good choice because there is a really important use-case for them.
If you haven`t done it yet, I recommend reading my post "Tellor vs. Band Protocol - The Clash Of Oracles For Decentralized Finance".
At the end of my post, I also like to remind you that my intention in this post is to raise your awareness of oracles and my intention is not to replace your own research. However, nothing in my post is sponsored, it really reflects my own opinion.
So I hope that I could provide you with some interesting and useful information about the importance of oracles.
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