We talk with Leonard about zero-knowledge proofs oracle, “Snarks as a Service”, and where is room for competition in the crowded DeFi oracles market.
Disclosure: This article was sponsored by Zoracles.
Hello! What’s your background, and what are you working on?
Hello, I’m Leonard and lead developer from The Zoracles Protocol. My background is from the search industry, and I originally was made aware of Bitcoin during the 2013 market cycle. A friend just published a blog post about the potential of blockchain technology and I found the concept fascinating.
Given my background in search, when I was approached to evaluate oracle technology and possibly improve it, there was a natural fit to my interests and skills. The idea behind Zoracles originated from a founding team member who had recently explored zero-knowledge proofs at work. We all had some experience tinkering with protocols like Cryptonote but there was some learning curve adjusting to the dynamics of ZKPs (zero-knowledge proofs).
Zoracles Protocol is built to provide confidential data to smart contracts. We are using zero-knowledge proofs and recently added a verifiable random function to protect data sources against price manipulation. Oracles have been a source of vulnerabilities for dApps and we are building a solution to provide some of the best-in-class security.
What’s Zoracles backstory?
The project has very humble beginnings. None of the founding team participated in a prior project from an official capacity so our relationships we established in the crypto industry have been very organic and based on the merit of our vision for confidential DeFi data. The founding team was very familiar with the technologies used for informational retrieval so building on top of Open Oracle to grab price feed data was fairly straightforward.
Open Oracle is a framework developed by Compound intended to democratize connecting to external data sources. The complexity is added when you need that data available for dApps yet also provide ZKPs to create anonymity of sources and amounts.
We had a very fortunate situation when Deus Finance decided to commit to our protocol very early in our development which validated what we were building. They were doing some innovative work with registrars and were not satisfied after exploring a few competing solutions. After evaluating our early work, they committed to using Open Oracle immediately and then upgrading to our confidential data contracts when we go live on mainnet.
The community has been really supportive in introducing other projects to Zoracles and also we are funded via community contributions. This was all organic and we never had an ICO or IEO. It was motivating to see members back what we are building and we plan to work very hard to build a protocol that can achieve wide adoption.
What went into building the Zoracles?
Zoracles is still very much a protocol under development. We have released a few proof of concepts on Github for use cases we feel will attract dApps or enterprises. We kicked off development in May but really picked up steam around August as oracle data became in high demand. The landscape really shifted from centralized oracle solutions to a decentralized model as dApps needed price feed data for DeFi. We have adapted to this model by considering various data sources and we plan to further decentralize our data with implementation of a variable random function.
Our development roadmap includes using Zokrates to rapidly deploy zero-knowledge proofs on Open Oracle. This decision to combine existing tools and focus entirely on our core technology is similar to Zcash’s choice to build on top of Bitcoin core while leveraging libsnark. The amount of developer resources conserved was substantial and freed the team to explore the most efficient Snarks while also looking at applications that could immediately benefit from confidential data.
We will use Zokrates through our initial phase of the roadmap but plan to build more custom solutions for clients as the protocol evolves.
What’s your business model?
Our main value proposition is “Snarks as a Service.” There isn’t really another public oracle solution that doesn’t involve using a utility token or blockchain but we felt this was the appropriate approach because the data we are retrieving isn’t proprietary.
Most oracle services charge users per data request. This can be very expensive and costly to dApp protocols that need frequent price feeds. Zoracles protocol doesn’t have a utility token and since data is provided via first party oracles such as Coinbase Pro, OKex and others, there isn’t a pay-per-request expense. Additionally since Zoracles Protocol leverages Uniswap Time Weighted Average Price, there isn’t a need for a node infrastructure of aggregators to ensure accurate pricing.
Snarks are very complicated but also extremely important components for blockchain technology to succeed. The foundation of these functions are probabilistic proofs. Many of the concepts overlap with creating verifiable random functions but our mission is to make these cutting-edge solutions seamless and available to dApp protocols or enterprises.
When we form future partnerships, the team is positioning Zora as a way to govern and steer the protocol. We will expect enterprises to take a stake which will fund the future development once we move beyond community contributions. This model is unique but we felt a utility token probably wouldn’t be viable long term as many protocols are charging to data where Zoracles will not have that impediment.
What’s your position on the regulatory landscape today?
Regulation for the crypto industry should be a net positive to attract more established enterprises and institutions. The beginnings of Bitcoin have proven that the bootstrapped approach was very necessary to get the network off the ground, but when you are protecting billions of dollars, as in the case of DeFi, some regulatory framework should be enacted to weed out bad actors. We support a common sense approach to regulation but it shouldn’t be restrictive that it stifles innovation.
Zoracles has always prioritized the protocol over the people developing it. Decentralization is important and the team has remained anonymous to avoid structural and regulatory issues with token issuance. Oftentimes, project list team members as a way of attracting interest in the project and confidence by detailing extensive backgrounds. Our philosophy is letting our idea of confidential oracles become the backbone of the protocol and let the code speak for itself.
What are your goals for the future?
The main focus right now for Zoracles is product. We want to build a useful product that enables DeFi transactions that aren’t currently feasible due to the transparent nature of the blockchain. An opportunity the entire team is excited about is on chain credit checks. Our Snark in development will be able to retrieve data from credit agencies, aggregate the scores, and privately transparent the results to be used by a dApp protocol or enterprise.
This is an extremely promising use case because you need a credit score for just about anything that involves loans or leasing. We feel our Snarks will be uniquely positioned to provide this service for many enterprises hesitant to get into the public space because the data of their customers is visible. Zoracles protocol solves this.
What are your future thoughts for the DeFi market?
We think it is still very early in the evolution of the DeFi market. Given the current global economic climate of negative rates, the opportunity couldn’t be better for DeFi to provide a viable alternative to the traditional financial markets.
The biggest challenge will be creating very user-friendly products that everyday people can interact with blockchains. We expect the infrastructure build out will happen for a few more years before we see wide adoption of DeFi and blockchain technologies. Our goal is to be part of the important infrastructure that drives DeFi forward.