Flare Time Series Oracle: Decentralized prices

Flare Time Series Oracle: Decentralized prices

The Flare Time Series Oracle, also known as the “FTSO”, provides rapidly updating, reliable and decentralized time series data to applications on the Flare network, while simultaneously earning rewards for FLR token delegators and an income for data providers.

It is Flare’s solution to the difficult challenge of acquiring off-chain time series data, such as cryptocurrency prices or economic data, but without incurring the risk of relying on a centralized entity to provide that data on-chain.

Time series data is data whose value varies over time. At launch, only cryptocurrency price data will be supported, such as the DOGE/USD and BTC/USD price pairs. Other time series data such as stock market prices, inflation data, housing starts, commodity prices, weather data and many others can be added to the network at a later date. FTSO data is currently updated every three minutes. Future versions of the FTSO may shorten this interval.

Once processed through the FTSO, this data can be used by decentralized applications built on Flare, for example to calculate a transaction price or the required collateral needed for an asset. Safety mechanisms are embedded to prevent monopolies and collusion, and updates to the FTSO are planned to enable the system to handle 1000s of data providers and 1000s of different data series.

The Flare Time Series Oracle currently provides frequently updating decentralized price data for 12 markets with many more coming soon

An oracle secured by the blockchain itself

The FTSO has been designed to be decentralized and scalable in order to address what is known as the “oracle problem”. Previously, blockchain applications that have required external data to operate have needed to obtain this data from centralized sources. This creates an increased security risk and can defeat the purpose of building on a blockchain in the first place. A decentralized system relying on a centralized data feed would essentially become centralized.

Because Flare’s consensus mechanism does not require the native token to be locked up as stake, it has been possible to use the token in a separate Proof-of-Stake like system to secure this decentralized price data provision.

Decentralized data providers feed the Flare Time Series Oracle with rapidly updating price data

The four key components of the FTSO

Data Providers - These are the individual independent oracles that gather data from various sources, report it to the FTSO system and receive rewards for doing so.

Delegators - These are native Flare token holders who can delegate their tokens to individual FTSO Data Providers that they deem trustworthy and high performing, receiving a share of the Data Provider rewards.

Applications - These are the programs built on Flare that utilize the output from the FTSO, be that native applications such as the FAsset system or any application building on Flare.

The FTSO itself - The FTSO is a collection of smart contracts which can be interacted with by data providers to submit data, delegators to choose which data providers are trustworthy, and applications to collect the output of the system such as the price of a supported cryptocurrency.

Decentralized data

It is the network of Data Providers that makes the FTSO decentralized. They are independent entities to Flare and not owned or managed by Flare in any way. They have built their own system to collect the required data from external sources and submit to the FTSO. They are rewarded during this process with newly minted Flare tokens if the system deems the data to be “accurate”.

While at first glance this process may appear simple, these providers are competing against potentially hundreds of other Data Providers, which makes submitting “accurate” data a challenge. After the top and bottom 25% of submitted prices have been removed, rewards are allocated based on proximity to the median of the remaining submissions, weighted by the volume of tokens delegated to each data provider by token holders.

ETH price from Binance vs the decentralized FTSO price

Chart of the Binance Ethereum price being closely tracked by the FTSO

Delegation and rewards

Individual FTSO data providers and token holders who have delegated to them both receive rewards based on the reliability of the data they provide. In true proof of stake fashion, these rewards scale with the total value of the tokens delegated to each provider.

Delegation is therefore an important mechanism because it incentivizes the data providers to strive for increasingly reliable and accurate data provision. Those that do provide higher quality data naturally earn more rewards for themselves and their delegators, which attracts even more token holders to delegate them their tokens. In the same way, poor performing data providers will quickly lose delegators, reducing their prominence in the data calculation.

Delegation carries no risk of token loss as no transfer of tokens occurs. And since the tokens aren’t locked in, a delegator can earn simultaneous rewards from delegating voting power to FTSO data providers and using their tokens within Flare dapps.

Summary

The FTSO is a critical protocol that enables Flare to be truly decentralized - providing accurate decentralized price data to applications built on the network.

Learn more about:

> State Connector

> Layer Cake

> FAssets