Witnet is a Layer-1 blockchain that was specifically designed to solve a problem known as the “oracle problem” in a decentralized and open manner. In this article, we’ll explain what the oracle problem is, how Witnet tackles it uniquely, the incentives that drive its network, and the transition it’s making to a new consensus mechanism called Proof of Stake.
What is the Oracle problem?
Smart contracts are faced with a problem, their inability to access information from external sources, they are confined to information only available on their network. The Oracle problem is all about making sure that the information this smart contract gets from external sources is accurate and reliable.
So What is the Witnet solution?
Witnet was created specifically to provide solutions for the Oracle problem. It does this by setting its own rules on its blockchain, rather than relying on rules from other networks. This approach ensures that the information Witnet provides is reliable and accurate. Since Witnet is decentralized and open, you don’t need to trust any single entity; you can trust the design of the system itself.
Cryptoeconomic incentives
In the Witnet system, incentives play a significant role. When a data request needs to be resolved, multiple nodes (computers in the network) compete to provide the most accurate information. These nodes can either act honestly, provide accurate data, and earn $WIT, or try to manipulate the results and get punished (their collateral is taken away).
Here’s how it works: Let’s say there are 10 nodes involved in resolving a data request. Each node secretly commits to its results, preventing them from copying each other. Then, they reveal their actual results. Nodes that fail to reveal their results face penalties. A “tally” function is applied to the revealed results to filter out unreliable data and produce a final, trusted result. The strictness of these filters is defined by the data request parameters. Nodes providing filtered-out data face penalties, which can damage their reputation and reduce their chances of being selected for future data retrieval tasks.
This system ensures that providing false information comes with significant consequences, encouraging honest behaviour within the network.
The Transition to Proof of Stake Consensus Mechanism
(Proof of Work — Proof of Stake)
Witnet is preparing to switch from its current consensus mechanism, called “Random Proof of Eligibility,” to a Proof of Stake system. This is a significant milestone for Witnet, making it the first Layer-1 blockchain to adopt Proof of Stake.
This transition is necessary due to the network’s growth. While the existing mechanism served its purpose, it can’t handle the expanding Witnet ecosystem effectively. Moving to Proof of Stake will make the network more efficient, secure, and scalable, ensuring its long-term success.
You can learn more about this transition in detail here: https://medium.com/witnet/why-proof-of-stake-a-dissection-of-the-transition-from-randpoe-to-pos-63c9078e4b10
Conclusion
Witnet’s innovative approach to solving the oracle problem, combined with its strong consensus mechanism and cryptoeconomic incentives, sets it apart in the blockchain world. As it moves toward adopting Proof of Stake, it’s poised for even greater achievements. By effectively addressing the oracle problem, Witnet brings us closer to realizing the full potential of smart contracts in real-world applications. Trust in blockchain-based information is crucial, and Witnet is at the forefront of providing that trust.
