What makes Zoracles, which combines "zero-knowledge proof" and "oracle", unique?

Table of Contents

The Native Deficiencies of Blockchain

Following the birth of the Ethereum blockchain, various decentralized applications emerged rapidly, especially in the explosive growth of decentralized finance (DeFi) this year. This growth has made many who have never dealt with cryptocurrencies aware of the endless possibilities of blockchain applications. However, blockchain itself has the inherent characteristic of being a "data island," meaning it cannot directly connect external data (such as weather data, Taiwan stock trading data, etc.). This is a fundamental flaw of blockchain and also the weakest point where many applications on the blockchain (especially DeFi) are most vulnerable to attacks. Therefore, many development teams are focusing on creating oracle solutions that can provide secure and trusted data for the blockchain.

Additionally, blockchain is actually a "pseudonymous but not anonymous" system where data on public chains like Bitcoin and Ethereum is publicly transparent, and anyone can view the data. Although most users currently do not have a strong demand for data privacy on the chain, if we expect large enterprises to adopt public chains in the future, privacy solutions for on-chain data must be developed because large corporations are more concerned about data privacy than regular users.

The above two points are inherent flaws of blockchain itself, and they are also the issues that the project we are introducing today, Zoracles, aims to address. The work that Zoracles intends to do can be broadly divided into two parts for discussion: "Open Oracle" and "Zero-Knowledge Proofs."

Open Oracle

Zoracles' Open Oracle is a prophecy service provider built on Compound's "Open Oracle" and Tezos' "Harbinger" prophecy services. The feature of Open Oracle is that the oracle itself can securely transmit off-chain data to the chain without the need for nodes, token collateral, reputation systems, etc. It is open to all exchanges, on-chain users, partners, customers, etc., to act as data providers or uploaders.

The above image shows the process diagram of Zoracles' Open Oracle providing off-chain pricing for DeFi protocols. In addition to data providers (Reporter) and uploaders (Poster), the following two contracts are also required:

OpenZoraclesPriceData: Where price data is stored.

UniswapAnchoredView: This contract is crucial for ensuring that price data feeding is more accurate. The decentralized exchange Uniswap itself provides "time-weighted price indices" for many currencies for other projects to use. This contract references Uniswap's price index to derive the current reasonable price range. When the data passes through this contract, if the off-chain price data deviates significantly from Uniswap's price index, it will be considered invalid data, thereby avoiding extreme market conditions, market manipulation, or other possible feeding errors.

Compared to other oracle projects, the operation of the Zoracles protocol does not require the inclusion of an economic model using application tokens as payment tools. Furthermore, since the data is provided by trusted data sources such as Coinbase Pro, OKEx, etc., there is no need to pay for each data request.

Zero-Knowledge Proofs

Existing oracle solutions have not provided perfect solutions for data privacy issues. What sets Zoracles apart is that, to address data privacy concerns, the project has introduced zero-knowledge proofs (ZKP) on the Open Oracle to securely and privately transmit confidential data from off-chain data operators to blockchain smart contracts.

The concept of zero-knowledge proofs is "proving that I know the correct answer without telling you the exact answer." For example, the following image illustrates the concept: "Where's Waldo?" - I provide a screenshot of Waldo in the top left corner, allowing me to prove that I know where Waldo is without revealing his exact location to you.

Zoracles utilizes this concept by encrypting off-chain private data and uploading it to blockchain smart contracts using zero-knowledge proof technology, without revealing the real data to any party during the process.

Business Model

Unlike oracle solutions such as Chainlink and Band Protocol, Zoracles, more accurately, is not an oracle but a "prophecy development service provider" that can build oracles for blockchain applications according to their needs. Similar to Microsoft Azure's "Software as a Service," Zoracles refers to its service as "Snarks as a Service."

For blockchain applications, they only need to pay Zoracles a one-time fee (i.e., development and deployment costs) and do not need to pay for each data update. This is very attractive for decentralized applications, especially protocols like DeFi that require frequent data updates.

Token Model

Zoracles did not conduct a formal presale, ICO, or IEO fundraising; it is a community-driven project. The team issued a total of 10,000 ZORA tokens. The token distribution is as shown in the following image:

Zoracles' token ZORA is not an "application token" like LINK or BAND. As a prophecy development service provider, Zoracles does not need a node ecosystem to maintain protocol operations, and the service fee does not have to be paid using its token ZORA. So where does the value capture of the ZORA token come from?

According to the team, ZORA is a governance token used to manage protocol affairs. One ZORA equals one vote, and the council formed by token holders can decide on the project's future changes and partners. It is worth noting that the council has the ultimate decision-making power to provide services for decentralized applications. If Zoracles plans to develop zero-knowledge proof on a new Oracle platform, the work proposal will be put to a vote by the council. When it receives support from the majority of members, developers will start working. In other words, if decentralized applications want Zoracles to develop oracles with zero-knowledge proof capabilities early, they must buy ZORA to vote for themselves.

Currently, the token has no other use besides governance, but future changes to the project will be decided by token holders, so there is a possibility of introducing token staking for profit sharing in the future.

Innovative Solution, but Lacking Value Capture Capability

In summary, Zoracles' proposed oracle framework differs significantly from other projects. Open Oracle can protect data security, significantly reduce data costs, and avoid the potential risk of undervalued decentralized oracle markets. Additionally, the technology of zero-knowledge proofs has been discussed in the blockchain field for many years, but teams that can actually implement it are few. Projects that can solve data privacy issues with oracle solutions are even rarer. If Zoracles can complete the development of this product, it is bound to occupy a significant position in the blockchain field.

Regarding the token, since the token only has governance functions and lacks an economic model to increase demand, the success of the project seems to have no direct link to the token price. Furthermore, although the project itself adopts decentralized governance, the core value source of Zoracles, the "development team" with the technology, is centralized. Even if the council approves the work proposal, there is no enforcement to bind developers. It relies on trust in the development team.

Future Six-Month Plan