DeFi
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Bybit Learn
Beginner
Sep 3, 2022

Tellor (TRB): A Secure Solution to Bringing Off-Chain Data On-Chain

Data is becoming an increasingly valuable commodity, which makes securing data more important than ever. Despite how often digital interaction occurs, data that exists off-chain can't be accessed by blockchain-based applications. Without access to this valuable off-chain data, it can be a challenge to use blockchains in real-world situations. 

To solve the issue, Tellor and its TRB token have been designed to provide Ethereum with connections to external data. On that note, if you’d like to invest your money in a project that could push the crypto industry forward, this guide explains everything you need to know about the Tellor system before you make that investment.

What Is Tellor?

Tellor is an oracle network that's able to connect Ethereum smart contracts to external data. The blockchain-based network is a secure and decentralized system. 

The platform is designed to provide Ethereum smart contracts with useful off-chain data. Every data feed that the project uses is stable and reliable. Before the Tellor oracle network was developed, crypto users were tasked with entering a standard cryptocurrency exchange to look up live data about the crypto market, as well as information about current market metrics. Exchanges are equipped with application programming interfaces (APIs) that provide users with the opportunity to keep track of up-to-date data feeds.

Tellor enables users to access the data in a single location via an oracle feed, or Ethereum-based smart contracts. The oracle feed sources reliable, real-time information that users can draw upon without navigating to an exchange.

Ethereum-based smart contracts typically don't have access to any off-chain data. Often, only the info in the contract is accessible. The Tellor network resolves this issue by making it easy for smart contracts to be connected to each on-chain data bank. These connections are backed directly by staked miners.

History of Tellor

The Tellor system was launched in 2019 by Michael Zemrose and Brenda Loya. Based in the U.S., the project was designed to resolve the issues oracles usually have — low speeds and high costs for off-chain data feeds. In the years preceding the launch of the project, Loya had garnered ample experience in data science and blockchain. Today, she is the CEO of Tellor. Another project, known as Daxia, was created by Loya and Zemrose, and is available via the Ethereum network. The Daxia project offers a protocol for derivatives contracts.

How Does Tellor Work?

Hosted directly on Ethereum, Tellor is a type of oracle network that's able to provide Ethereum-based smart contracts with off-chain data. The platform exists as a medium situated between Ethereum and the off-chain data point that the Tellor oracle accesses. Once connections between the two are made, users are provided with trustless feeds. By using the oracle as a bridge that supports the connection, third parties are no longer needed, which allows for increased decentralization.

This platform contains a vast network of staked miners who provide Ethereum with secure and trustless data. Miners work together to solve mathematical equations and other problems. Once the problems are solved, off-chain information is confirmed and validated. The proof of work (PoW) consensus mechanism is the basis on which the entire platform is built.

By validating information before sending it to Ethereum, Tellor prevents the manipulation of data pulled from off-chain sources. The smart contracts on the platform update data feeds at five-minute intervals. Since miners must provide staked tokens to participate, they’re appropriately incentivized to deliver accurate data. If inaccurate info is submitted, miners can lose their tokens.

Also known as Tributes (TRB), the Tellor token is based on Ethereum and supports the platform’s incentivization program. TRB is staked directly by miners, and Tellor rewards the miners with "tips," which are paid when queries are accurately answered.

Features of Tellor

The platform is outfitted with a range of features that include everything from security to a governance system.

Hybrid Proof of Work/Proof of Stake Consensus

Tellor is based on a hybrid proof of work/proof of stake consensus mechanism that’s fully decentralized, and that asks members to solve mathematical puzzles to ensure the network’s security. While PoW consensus mechanisms don’t allow staking, Tellor has tweaked theirs to make sure it does. 

If miners want to earn rewards, they have to stake 1,000 Tributes in the network staking pool. Concurrently, they have to take part in voting on proposals every quarter. 

The tokens will be slashed if a miner's answer is challenged and deemed incorrect. By paying a fee, a challenger can dispute a miner’s answer. Tellor token holders are then tasked with voting on the answer. If the holders state that the answer is valid, then the fee that the challenger paid is awarded to the miner.

Security

The platform’s security is administered via Tellor's architecture, which employs a bond/dispute mechanism to ensure stated mathematical values are correct. The overall security of this network largely depends on the staked miners, who are responsible for responding to off-chain data requests. These miners are given incentives to participate in providing network security. In order for data validity to be proven, any participant will need to stake a total of 500 Tributes.

Dispute Mechanism

As previously mentioned, Tellor uses a unique dispute mechanism that allows users to challenge a data value immediately after data is positioned on-chain. If data remains on-chain for a lengthy period of time without being disputed, it's likely to remain secure. Tellor can safely assume that unchallenged data is secure since users are incentivized to dispute invalid values.

Anyone can dispute a data submission once a value is positioned on-chain. However, the challenger needs to pay a small dispute fee. Once the fee is paid and the challenge has been properly submitted, the account of the staked miner who originally submitted the data will be locked until a vote takes place. Over the course of two days, the Tellor governance mechanism allows voting to occur on the validity of the data.

If the data is correct, the miner’s account is unlocked, and they receive the fee that the challenger paid. In the event the data is incorrect, the challenger receives a reward.

Governance

Tellor’s governance system is centered on settling disputes or challenges. This system is also used when new features or upgrades to the Tellor platform need a vote. For instance, a change to the monetary policy can occur only once a vote has taken place. In the governance system, voting power is balanced primarily among its users, holders and reporters (data providers).

Keep in mind that each group of community members is weighted differently. One important aspect of Tellor's governance system is that the Tellor platform is able to be deployed across numerous chains. While TRB is an ERC-20token situated on the Ethereum network, users can launch the Tellor platform on practically any chain.

In this situation, the governance system has to change to accommodate the chain in question. The governance for Tellor on a different chain is dictated by anyone who obtains TRB on that specific chain.

Mining

Tellor uses an expansive network of miners to ensure the entire platform is secure and requests are responded to promptly. However, mining on Tellor doesn't work exactly like that on other PoW platforms.

Instead, miners are required to stake a total of 500 TRB to indicate that they believe the data they've provided is valid, and that they support the trustless system. Mining is permitted only by individuals who have placed a stake in the Tellor system. In order to incentivize miners to provide data through base rewards and tips via user requests, the top miners gain access to block rewards that amount to just over 15 TRB.

Staking

Staking occurs during the mining process, which means that a miner will need to stake some of their coins if they want to validate information and participate in the mining process. Staked miners provide necessary information to requests, and determine if the information is reliable.

Then, to be verified, the potential miner is asked to solve a mathematical equation. Staked miners will receive TRB when they request off-chain data and validate them. If a miner wants to qualify for various block rewards, they can do so by staking a total of 1,000 TRB.

Pros of Using Tellor

While Tellor is a feature-rich crypto platform that focuses on bridging the gap between Ethereum and off-chain data, it has a couple of notable benefits of which you should be aware.

Simplicity

Tellor is easy to use, since it provides Ethereum smart contract users with the ability to obtain reliable data in a decentralized and protected manner. The Tellor team’s goal is to make this platform accessible to everyone.

Security

In addition to Tellor's state-of-the-art security, the network provides increased protection by ensuring that any attack on the platform costs 1,000 TRB per block. Information that's sent to the blockchain becomes more trustworthy as the total number of approvals increases. This form of security works just like Bitcoin’s security.

Cons of Using Tellor

Even though Tellor is a secure and popular solution for bringing off-chain data on-chain, users have experienced the following problems.

Community Has Yet to Gain Full Momentum

The main issue with Tellor is that it has yet to reach full momentum. Despite how beneficial Tellor has proven to be, its community is still relatively small compared to the communities of some other crypto projects. The project will become stronger only by growing its community.

TRB Token Doesn't Have Ample Versatility

While the Tellor token can be applied to debit and smart contract transactions, it can't be used as payment in cloud storage platforms, crypto games that offer in-game items, or NFT markets, which means it’s less useful than some other tokens.

Use Cases of Tellor

Tellor can be used as an oracle for all kinds of off-chain information. Because of how the platform is structured, it's not perfectly positioned to be used for high-speed values that require immediate accuracy. However, Tellor currently has many use cases. The platform’s team wants to further increase use cases in the months and years to come. Tellor’s use cases include:

  • Bridging various assets

  • L2 security via sequencer validation and data availability

  • Prediction markets

  • Price feeds

Tellor Road Map

Since its 2019 launch, Tellor has significantly expanded its platform. For instance, Tellor Improvement Proposals for the governance system were launched in October 2020. A streamlined version of the platform, referred to as TellorFlex, was also launched on Polygon in January 2022. It provides users on the Polygon platform with oracle data.

In the upcoming months and years, the Tellor platform aims to continue making improvements to the decentralized finance (DeFi) industry, by providing a secure and decentralized oracle. They eventually want to be the standard for decentralized applications (DApps) that require high-value data. Their launch on Polygon is the first step in their expansion.

TRB Tokenomics

The Tellor token is the primary aspect of network security. When the token price is high, the cost of directly attacking the network is more expensive. At the moment, TRB oscillates from $18 to $23 in value. More than 1.7 million TRB are circulating. The existing market cap is just above $33 million, while the fully diluted market cap is $46 million.

Where to Buy TRB

If you want to purchase TRB, numerous platforms offer the token, one of which is Bybit. When using Bybit, TRB isavailable via perpetual contracts. A perpetual contract is unique because it doesn't have an end date. These contracts are essentially derivatives that provide you with the opportunity to speculate on a cryptocurrency's future direction.

While standard futures contracts expire each quarter, perpetual contracts never expire. You can use them to bet on a currency's price over a short or long period of time. If you want to purchase TRB perpetual contracts on Bybit, you can start by signing up on Bybit, or logging in to your existing Bybit account. You can find TRB by entering its three letters into the search bar at the top of the Derivatives page. 

Is Tellor a Good Investment?

Tellor is still a relatively small network, despite its advantages. However, its platform has a strong base, making it a good future investment. Understand that the Tellor team is fully aware of the need for growth, which is evident by their move to Polygon earlier this year.

The Future of Tellor

Tellor has a considerable amount of value in the crypto industry since it solves the cost and speed issues with oracles. Even though the future of the platform isn't set in stone, DeFi applications are continuing to increase in popularity, which indicates a relatively bright future for Tellor.

Closing Thoughts

Tellor has already proven to be a secure solution for bringing off-chain data to a blockchain such as Ethereum. Although it still has improvements to make, miners and investors alike have good reason to continue using the platform for the foreseeable future. You can find the Tellor token on Bybit, and on other cryptocurrency exchanges.