Key Insights From This Interview
- Many blockchain applications, notably in Decentralised Finance (DeFi), rely on Oracles, the API-intermediated, off-chain data feeds that supply smart contracts with price or event or credit or weather or other information. SupraOracles has built high volume, high security, always-available, real-time API connectivity for the Oracles that feed blockchain applications.
- The strongest appetite for Oracles came initially (and unsurprisingly) in the form of cryptocurrency pricing feeds, closely followed by foreign exchange and commodity price data. Growing interest in equity prices, sports data (chiefly to feed sports betting) and weather data indicates ample opportunity for Oracle-fed DeFi applications to emerge and scale quickly.
- DeFi experiments are attracting interest from traditional financial institutions and their regulators. Project Guardian, in which the Monetary Authority of Singapore (MAS) is piloting with DBS, J.P. Morgan and Marketnode the use of public blockchains for unintermediated wholesale funding transactions, is a clear instance of DeFi entering the mainstream.
- The convergence of DeFi and traditional financial markets is creating an opportunity to enhance the liquidity of digital asset markets in general by improving the speed, scale and security of inter-operability between different Layer 1 blockchain protocols and between public, permissionless blockchain networks and private, permissioned blockchain networks.
- The re-rating of the cryptocurrency and DeFi markets has created an opportunity for a new generation of Layer 1 blockchain technologies to secure adoption by offering faster processing and greater data security and reliability, not just because these are desirable in their own right but because they are an essential prerequisite to sustained institutional engagement.
- In operating Oracles, the SupraOracles Layer 1 blockchain is achieving transaction per second (TPS) speeds that average 200,000, with a peak rate of 526,000, across a fifth of the nodes in its network using everyday forms of hardware, delivering Oracle look-ups within three to five seconds. It indicates decentralised applications can support traditional market throughputs.
- TPS can be further accelerated – by, for example, using satellite technology – but even if decentralised applications never match the processing speeds of the centralised market infrastructures that support traditional finance, the potential benefits include faster settlement timetables than the current global standard of trade date plus two days (T+2).
- The use of blockchain to tokenise securities, funds and physical assets such as real estate is making steady rather than spectacular progress, but the technical capabilities to make the transition successfully are being built. The principal obstacles to tokenisation – namely, regulatory and legislative support and education of buy-side institutions – are not technical.
- SupraOracles has partnerships with cryptocurrency and security and fund token exchanges to source price data for Oracles. It is also working with a major payments market infrastructure to enable creditworthy retail investors to access institutional-style lending, borrowing and investing opportunities directly, without going through a centralised intermediary institution.
- Data standards that are adaptable for use in DeFi applications, such as ISO 2022, can make a major contribution to the convergence of DeFi and traditional finance. If traditional financial institutions can access digital currencies and assets via familiar messaging protocols such as FIX, it lowers the barriers to entry to their participation in the markets.
- Pre-coded Oracle functionality has accelerated the emergence and development of DeFi services by saving blockchain-based application developers time and money. Further improvements to the speed, scalability and especially the security and integrity of Oracles are essential to secure the involvement of traditional financial institutions in tokenised markets.
- The current focus within DeFi markets on the effectiveness of the technology is a temporary stage on the transition from traditional, centralised, highly intermediated finance to decentralised, unintermediated finance of the Web 3.0 era. It is when the technology is invisible simply because it works that the age of DeFi will truly have arrived.
The future of blockchain now hinges more than ever on moving beyond crypto-currencies to create the universe of decentralised products and services that almost all characterisations of Web 3.0 endorse. These products and services will make use of the smart contracts pioneered by the entrepreneurs that created the Decentralised Finance (DeFi) and Non-Fungible Token (NFT) markets and which are now building the security token and Metaverse markets as well. The success of products and services built on smart contracts ultimately depends on the ability of the smart contracts to use Oracles to access off-chain sources of price and other data quickly and securely. This is the challenge that SupraOracles, a business established on the basis of academic expertise in 2018, intends to meet by building super-fast Oracles on a high-performing blockchain infrastructure. Dominic Hobson, co-founder of Future of Finance, spoke to Heslin Kim, chief strategy officer and co-founder of SupraOracles.
A full recording of the interview is available on this page. A transcript of the interview, which follows the questions below, is also available if you click on “Read the Transcript.” If you click on any question you will be taken to the exact point in the recording where the question is asked and answered.
What has SupraOracles learned about the quality of Oracle data sources across the various sectors – cryptocurrencies, commodities, securities, money markets, foreign exchange, weather, politics, sport and so on – that the company supports?