How to connect blockchain to the outside world

"The world is so big, I want to go see it" - On the morning of April 14, 2015, a resignation letter triggered heated comments. In the same year, Reality Keys and Oraclize successively launched oracle (here it refers to the oracle machine, not the oracle database) solutions, taking the blockchain area to see the real world outside.

Why?

First, let’s take a practical example to understand why blockchain needs to look at the outside world. For example, in a blockchain-based digital currency trading platform, the system needs to obtain the latest price of a specified digital currency at regular intervals. In traditional Internet systems, this is the simplest way to do this, which is to input price data regularly or obtain data through a third-party interface. However, for blockchain-based systems, the situation is different.

In the blockchain system, as a third-party external data source (data feed), it will send information data specified by your blockchain and smart contract. Since the data transmitter is a centralized participant, it cannot be taken for granted that the smart contract can directly obtain relevant external data. For example, if you want to obtain the latest transaction price of ETH/USD from some Internet transactions, the data transmitter will return the compromised transaction price from these transaction data. This data transmitter will also integrate different data sources and reach a consensus to obtain a balanced transaction price. However, how can you ensure that this data transmitter will not modify the data in the process? Is the node receiving external data a single node or all nodes? How can these external data reach a consensus in the blockchain? Since the blockchain itself is a world - the world of decentralized systems, the blockchain does not understand external information, and the currency price is information outside the blockchain. How to input external information into the blockchain, how many blockchain nodes access external information, and whether it will become a centralized solution, there are many variables.

So, what solutions are currently available to solve these problems of connecting blockchain to the outside world? As far as Elwin knows, there are currently two relatively mature solutions: Reality Keys and Oraclize. Reality Keys provides an oracle solution that can automatically check and encrypt oracle submissions, while Oraclize also provides a similar solution and is tailor-made for Ethereum applications.

Reality Keys:

RealityKeys is a cryptographic proof of predictions about facts. Its service is to provide automated and manually verified data, which will hopefully provide a new generation of automated, unconditionally trusted information services. Reality Keys monitors a range of data sources including exchange rates, cryptocurrency transactions, personal training goals (which can be established on the Reality Keys website) or millions of topics on Wikipedia, all based on publicly available API interfaces. In addition to the public API, anyone can check facts and the status of existing facts in Reality Keys. This service of Reality Keys is completely free, but it provides a paid service for manual secondary confirmation to avoid omissions or changes beyond the automated check of data.

Elwin briefly introduces how RealityKeys works. For each fact (proof), there are two ECDSA (Elliptic Curve Signature Algorithm) type Reality Keys in the system, one is Yes and the other is No. We hold the private key ourselves and publish the public key to the outside world, so that you can create encrypted information or Bitcoin contracts. For users of Ethereum and other advanced smart contract platforms, the system will provide a hash to verify the result and the address we use to sign.

When you create a fact, the system waits until the specified time. The system then performs an automatic check for the correct API and publishes the result. In the event that anyone questions the result of the API query, they can pay for manual reconfirmation. Otherwise, the original result returned by the API will be maintained. When a fact is registered, the public key for each possible result is published. When the result is confirmed, the private key corresponding to the correct result is published. If the private key for the corresponding result does not exist, it will never be published. For the selected result, we use the private key of the corresponding result to decrypt the information or complete the Bitcoin contract. If the private key is lost, the result will never be released. We can also sign the return value with an Ethereum address to support Ethereum smart contracts.

In financial transactions, the data provided by Reality Keys can be verified by a third-party escrow system. Bitcoin and similar decentralized virtual currencies allow you to perform secured transactions directly on the network without having to trust other third parties. Reality Keys are compatible with the Bitcoin network and can be used to create transactions that are only for a certain expenditure.

Etheropt is a completely decentralized platform that aims to trade options on multiple digital currencies. The price of Ether comes from many sources, including the main Ether exchange Poloniex, and then Reality Keys verifies these messages. The platform has no operator, and all Ether transactions, storage, withdrawals, and transactions are automatically executed by Ethereum smart contracts. Reality Keys solves the reliability and authenticity issues of external price information acquisition, allowing this decentralized autonomous transaction to be successfully implemented.

The open source code address of Reality Keys is: https://github.com/realitykeys.

Oraclize:

Oraclize is positioned as a data carrier for decentralized applications, serving as a reliable link between Web APIs and DApps. With Oraclize, there is no need to establish an additional trust chain because our actions have been cryptographically verified. Oraclize is a provably honest oracle service that allows smart contracts to access the Internet. Oraclize is platform-independent and provides a virtual interface for all mainstream smart contract capability platforms. It is conceivable that by investing tens of thousands of meaningful data into the blockchain, the smart contract industry can be more prosperous and more valuable applications can be more vital.

Although Oraclize is a centralized service, it is sharing the vision of a decentralized network and providing a provably honest service. Through Oraclize, Ethereum, Bitcoin, RootStock, and Eris (Eris blockchain, a consortium chain) can currently be supported to connect to the outside world of the Internet and obtain valuable information. DApps use Oraclize's services as an additional layer for secure data acquisition, ensuring that the DApps system is robust and trustworthy enough, and that it is not easily attacked through their Oracle mechanism.

Taking Ethereum as an example, Ethereum smart contracts can only access information on the chain, and they cannot obtain external information and data. As a data transmitter, Oraclize can provide a reliable connection between Ethereum's DApps and Web APIs, allowing Dapp applications based on smart contracts to obtain external information and data without trust. It is very simple to use the Oraclize service on the Ethereum public chain. You only need to reference the usingOraclize contract in your smart contract code, and then call the relevant methods according to the API documentation. If it is a private chain, it will be more troublesome and you need to deploy the Oraclize service separately.

The ability of Oraclize to provide a provably honest way of securely fetching information from Internet pages relies on TLS notary, a service that allows an auditor to verify that a specific Web page was accurately fetched.

As a third party that transmits data, it is necessary to keep the data from being manipulated by the data source so that the data you are getting is not actually true. In other words, you need to avoid lies like "I never said that!" that are told by people on the Internet. TLS Notarization is this third party that is actually secure because it is like when you browse to a HTTPS secure website, you can see proof that they are company X (if you check the certificate). TLS Notarization essentially records these bytes in such a way that you can use them again later so that you can verify these bytes again.

The open source code address of Oraclize is: https://github.com/oraclize.

Conclusion:

Oracle has many application scenarios, using blockchain-based automatic execution of smart contracts to replace human labor, including decentralized trading market systems, applications for instant calculation and payment of compensation for flight delays, on-chain identity authentication systems, reputation systems based on online systems (such as Twitter or Weibo), decentralized gambling systems, various prediction systems (such as sports results or campaigns), automatic cash on delivery systems, automatic hosting of internal releases and sponsorship systems, etc. Connected to the Internet and opening up the real world outside, blockchain and smart contracts will become more dynamic and generate more possibilities.