Decentralized Oracle Network
A system where multiple independent nodes each report external data, which is then aggregated into a single, harder-to-manipulate value for smart contracts to use.
A decentralized oracle network is a system where multiple independent nodes each independently report external, off-chain data (such as an asset's price), which is then aggregated — commonly by taking a median or weighted average — into a single value that smart contracts actually consume.
Relying on multiple independent nodes, rather than a single data source, is specifically intended to reduce the oracle manipulation risk (see Kaavon's "Oracle Manipulation" glossary definition) a single point of failure would otherwise create, since an attacker would generally need to compromise a meaningful fraction of the independent nodes simultaneously to successfully manipulate the aggregated result.
Examples
- A decentralized oracle network's aggregated price is harder to manipulate than a single data source, since an attacker would need to compromise many independent nodes at once.
- Decentralized oracle networks are a direct response to the documented risk of oracle manipulation attacks against DeFi protocols relying on a single data source.