On Public Decentralized Ledger Oracles via a Paired-Question Protocol

Abstract

Blockchain technology enables the operation of fully decentralized applications without the need for a central authority to manage the execution of the underlying process. However, a critical limitation in the technology today is the inability for such applications to query information external to the blockchain. Applications must make use of a decentralized oracle, i.e. a trusted source of external information. In this work we propose the paired-question decentralized oracle protocol, designed to extract true answers from the public. When querying the oracle, a user submits pairs of antithetic questions and voting users answer them for the chance to receive rewards. This new protocol lends itself to a simple formal analysis, and it is shown to strongly incentivize a Nash equilibrium of truthful reporting. This paper also discusses a number of extensions to the base protocol to improve its cost-effectiveness, security, and applicability.