🔴 Data feeds – free data sources for smart contracts. How do they work and what value do they give to web3 solutions? 💬👇

🔴 In the last few posts, I’ve broken down how blockchain oracles work. While oracles are often credited with the downright omnipotent ability to provide data for contracts, in reality they have quite a few limitations and risks. I encourage you to read my posts if you are interested in this topic (links in the comments). It’s valuable knowledge for anyone interested and involved in the blockchain industry.

🔴 The decentralized oracle usage model involves asking several independent oracles for data outside the blockchain, and then determining the final value on its own, based on multiple answers (from multiple oracles). A smart contract implementing the described strategy will unfortunately incur high costs. Querying an oracle requires a fee in exchange for completing an off-chain query.

🔴 Data feeds are data “produced” by oracles, published on the blockchain, available to be read for free by smart contracts. What kind of data? For example, cryptocurrency prices (BTC/USD, ETH/USD, etc.) – very valuable data for DEFI (decentralized finance) solutions. Other data is, for example, cryptocurrency reserves held by some blockchain solutions. There is also data on NFT prices.

🔴 Who produces data feeds? The community, you can say that this is a sponsored activity. Very many projects use this data, so it is needed. The data that data feeds provide and the quality of the data varies by technology provider/ oracle network.

🔴 Here is a dashboard describing a particular data feed of ETH/USD prices on the Chainlink network: https://data.chain.link/ethereum/mainnet/crypto-usd/eth-usd. Among other things, the page shows the number of oracles that provide data (e.g., 31). The final, single value of ETH/USD available for contract reading is recorded on the blockchain based on 31 oracle responses. Due to the widespread use of this data, it is of high quality and safe to use in web3 solutions.

🔴 Chainlink, is the technology and network that I mention each time in the context of oracle. What is Chainlink? What products does it provide? I will tell you about it in my next post.