Umbrella Network: Why We Need Oracles

Aniel Essien
3 min readMay 27, 2022

Blockchain technology has single-handedly transformed the way the works and it keeps getting better. First, we saw Bitcoin introduce a new and decentralized method of storing, measuring, and transacting value, and then Ethereum joined the revolution with a host of applications for blockchain tech. The big snags came when decentralized applications came into the picture and a system needed to be created for their operation.

Securing off-chain inputs without trust soon becomes one of the biggest challenges of blockchain networks. Smart contracts are not designed to execute when all nodes on the network cannot verify their transactions. Hence the need for oracles.

What are decentralized oracles?

These are entities that link a blockchain network to the world outside. With oracles, smart contracts get access to a variety of off-chain information by entering all data input using an outside transaction. However, bringing in one source for all real-world data to smart contracts has been a thorn in the side of the crypto industry for quite a long time due to its high risk and conflict with the principles of blockchain technology.

Decentralized oracles offer the best of both worlds, and eliminate the risks centralization poses, and blockchains with a link to off-chain data. They are a set of independent oracle nodes which supply off-chain information to a network on the blockchain. Every node in a network of decentralized oracles collects data separately from an off-chain source and after these nodes feed the data on-chain, the data is collected to determine the veracity of that data point. What this means is that for an oracle network to be truly decentralized, it must be owned by a community.

Using a consensus model, it can be ensured that oracle nodes function autonomously and transparently. To this effect, Umbrella Network is committed to building a delegated proof of stake consensus model (DPos) that lets native token holders on the network delegate their tokens for consensus. That being said, decentralized oracles still need economic viability to function smoothly which is where Umbrella Network comes in.

On Umbrella, economic viability is achieved by extreme cuts on gas costs; a strategy that most oracle networks fail to integrate. How do they do this? Umbrella manages its gas costs by implementing a system of Merkle Trees to accumulate multiple transactions into just one node, smoothly enabling all nodes to authenticate tons of transactions at the price at which other oracle networks would authenticate one transaction.

There’s more to Umbrella Network than being sustainable and economically viable. This network is also superbly resistant to attacks and any form of manipulation. And it’s not hard to figure out why. Umbrella has delegated control of the protocol to their community members as any truly decentralized oracle should. On this network, control is not wielded by a shareholder or private investor regardless of their contributions.

Community members on Umbrella Network own a huge chunk of all available public tokens and no pre-mined tokens exist leveraging independent of the community. Umbrella Network is a perfect example of decentralization at its peak and a good model to emulate when it comes to surmounting the challenges in decentralization.

About Umbrella Network

Umbrella Network is a scalable, decentralized, and community-owned oracle that utilizes Layer 2 technology to integrate real-time data into smart contracts for accurate and timely reports. Umbrella Network brings the world’s data to blockchains to enable DeFi applications to perform at the optimum level regarding precise information dissemination.

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