A Comprehensive Understanding of the New Star HazelWord in the Polkadot Ecosystem Oracle
On January 19, Hazel announced that it has secured $500,000 in seed round financing.In the past year, the DeFi concept has swept the blockchain world, leading to a surge in the market value of numerous DeFi projects. As the infrastructure oracle for all DeFi projects, it has also experienced significant growth.
So, what exactly is an oracle, and what is the current market landscape? What are the potential projects?
As we all know, the traceability and tamper-proof characteristics of blockchain can make data more trustworthy, but if the original data has issues, blockchain cannot solve that. An oracle acts as middleware, writing real-world data onto the blockchain, such as prices, weather, scores, and other real-world information. For smart contracts, reliable third-party information sources are necessary for execution on the blockchain; otherwise, the correct execution of smart contracts may be jeopardized. Therefore, any industry related to data is a potential application scenario for oracles, and this is especially true for DeFi projects.
It can be said that without oracles providing "highly certain market information sources," DeFi protocols cannot obtain core data such as price information and volatility.
Early oracles include Chainlink, Band Protocol, Tellor, and NEST. In terms of project valuation, currently, one oracle project dominates the field. According to typical data from October 2020, the leading Chainlink has a circulating market value of up to $3.4 billion, which is 48 times that of NEST. Nevertheless, as a proposer and practitioner of the "price oracle" solution, NEST also has significant upward potential. However, with the vigorous development of the entire DeFi field, other oracle projects, especially emerging ones, have opportunities to become choices for more DeFi projects.
In 2021, the new oracle project Hazel based on the Polkadot network has gained favor from investment institutions. Hazel provides a data prediction service based on event asset collateral and a data correction mechanism based on fact verification. It addresses the fundamental issue of trustworthy data sources on the blockchain through factual endorsement.
1. How Hazel Works
Users can collateralize bidirectional assets of predicted events on contracts through its Dapp and map on-chain assets to event outcomes, achieving value anchoring. In terms of asset price data, the oracle uses miner quotes, and the price is generated on-chain through real-time corrections by miners across the network, effectively avoiding potential risks such as node failures and malicious behavior during the centralized node pricing process.
Taking DOT/USDT as an example, suppose the current market price of DOT is 5 USDT, and the quote scale factor is 1. The miner needs to send 1 DOT and 5 USDT as quoted assets to the on-chain oracle (and pay a quoting fee of 0.01 DOT). This quote will be verified by any miner in the market. If the current quoted trading pair deviates from the market price, any miner can send 1 DOT to the on-chain oracle to exchange for 5 USDT or send 5 USDT to exchange for 1 DOT to realize arbitrage. While arbitraging, miners complete the on-chain price correction, and the corrected quote will no longer have arbitrage opportunities, thus forming a fair market price. Once the oracle's prediction deviates from the facts, it means users have arbitrage opportunities.
2. Main Application Areas of Hazel
Information analysis is Hazel's primary application area. It uses powerful information analysis capabilities to determine the outcome of an event and, with the support of analysts, evolves on-chain contracts into self-evolving systems. The second area is trading platforms, where Hazel provides a trading platform for various event data to facilitate data circulation. The third area is DeFi, where Hazel can provide reasonable token prices, volatility, and other information for DeFi applications. The fourth area is blockchain games, where Hazel can meet the diverse data needs from blockchain games.
3. Features of Hazel Compared to Other Oracles
- Complete Decentralization
Since the reporting of event data is collateralized by real assets, Hazel allows any user in the distributed network to participate in reporting. Compared to the multi-centralized node reporting mechanism that relies on node credit, the endorsement by real assets can achieve a more secure data prediction mechanism, reducing the risk of malicious collusion among nodes.
- Upgraded On-Chain Data Privacy Protection
Hazel achieves privacy protection for high-value oracle data and subsequent collaborative computing applications through the synergistic application of TEE, MPC, and on-chain contracts, truly realizing data value transactions without visibility among data parties.
- Diversification of Event Data Types
In addition to traditional cryptocurrency price data, Hazel allows the issuance of on-chain assets for any event and achieves predictions for any off-chain event data through event result asset collateral, truly realizing diversified data connectivity between on-chain and off-chain.
- High Risk Resistance
The protocol aims to maintain CoC (Cost of Corruption) > PfC (Profit from Corruption) while charging the lowest fees.
4. Project Prospects and Progress
2021 is the first year of Hazel's inception. On January 19, Hazel announced it had secured $500,000 in seed round financing. A month later, on February 21, HazelWord announced it had obtained a new round of financing, led by White Whale Capital, with participation from Canace Capital, Sich Ventures, AC Capital, CatcherVC, TODO BLOCK, and SSSnodes.
Currently, the development of the testnet has been completed. In the second quarter, Hazel will officially launch the testnet, deploying key smart contracts in the test network; launch the mainnet, open Hazel, and release hacker bounty tasks, with the community assisting in developing some analytical functions to support core product development; launch the Dapp, including supporting back-end and front-end, with Dapp supporting iOS, Android, and WEB. In the third quarter, Hazel will integrate more ecological partners.
