Earlier this week, we covered the current oracles landscape. Oracles emerged as a means to bridge the onchain world with offchain data sources, unlocking more potential usecases not previously possible. A common example would be the use of CEX prices to providing asset pricing for a perps protocol. While Chainlink is the primary provider in the oracle space, Pyth has gained a lot of adoption in the derivatives space, and other protocols continue to provide more flexible approaches and innovate upon the existing standards that exist in oracles. Some drawbacks in the oracles space include flawed business models, centralization concerns, accessibility restrictions, and more.
In todays edition, we’ll be briefing you on SEDA. SEDA Protocol, which is launching its mainnet today, is introducing “oracles 2.0”, aiming to reduce some of the tradeoffs that smart contracts make when interacting with existing oracles protocols. Specifically, SEDA is an L1 with the ability to facilitate trustless data flow between offchain data sources and other blockchains, serving as an Intent-Based Modular Data Layer.
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Overview of SEDA
SEDA aims to go above and beyond what has historically been classified as an Oracle. It enables developers to permissionlessly deploy their own data feeds across various chains, sort of like how Celestia provides DA for other sovereign chains, made possible by a modular interface. The permissionless aspect of the protocol is made possible by its economic incentives mechanism, which we’ll detail below.
SEDA is, by design, multichain-native, fast, scalable, permissionless, and highly programmable. To date, the protocol has raised $25M Today marks a notable day in SEDA’s development, as new docs have been provided and protocol mainnet is now live.
The SEDA Network is comprised of four key components:
SEDA Chain is used for settlement and data storage for distribution.
Overlay Network is a Multi-Party Computation (MPC) network that does the data querying and computation. Both SEDA Chain and the Overlay Network have security guarantees consistent with leading layer one networks. Security guarantees are facilitated through game theory, cryptography, strong backstops, and a high degree of configurability and computability.
Solvers are the entities forwarding new data requests to the SEDA Cchain and forwarding results to destination chains.
Data Providers are the (private) data providers plugging into the SEDA Network.
Other important terminology to note includes:
Destination Networks are essentially the end user of the offchain data provided. These networks can be any blockchain, all that is needed is to deploy a consumer contract that is capable verifying SEDA-generated proofs. Additional middleware may emerge in the future to facilitate the process of data flowing from the offchain provider to the destination network, which could optimize costs.
Programs are the instructions that the Overlay Network nodes directly execute.
How Does SEDA Work?
SEDA allows developers on any blockchain to use its services with shared security. Public and private data alike can be accessed, depending on the usecase for this data. Onchain developers can give specific instructions via Programs for the offchain data providers to follow, as the offchain computation allows for more flexible possibilities.
Offchain data providers are incentivized with revenue share that is based on the utilization and value of the data that they contributed. This is sort of similar to the model proposed for Render Protocol, which aims to align revenue rewards with those who actually produce the dataset that is being used, rather than just rewarding all contributors equally. Providers can also customize a fee to be charged per query, sort of like API calls. If this wasn’t enough data providers also can get a percentage of the revenue that the onchain data generates through OEV (Oracle Extractable Value).
SEDA’s Take on OEV
OEV is an interesting concept of itself, providing a way to value the data that oracles provide, which has been a pain point in the oracle space since its inception. OEV is a significant integration of SEDA. An easy example to understand OEV would be an oracle providing data used to liquidate a position on a lending protocol. In the SEDA system, the provider would receive a fee for triggering the liquidation, prompting data providers to compete to provide price updates.
‘Searchers’ are those seeking OEV opportunities. In SEDA’s OEV system, these searchers can actually participate in auctions, bidding on the oracle update data which is bundled up. The proceeds of this sale is then distributed to data consumers, as well as data providers and SEDA validators, as well as the SEDA network itself. This is a unique proposition provided by SEDA that can change the way OEV is distributed. SEDA removes the middleman between data providers, reducing costs and allowing more value flow to those involved with delivering the data.
SEDA is now launching its mainnet, bringing a host of new possibilities in the data provision space. In the near future, SEDA will be releasing more info on protocol mechanics and launching it’s token upgrade, with more mainnet features to follow…
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