Tellor is a fairly new small-cap altcoin in decentralized finance (DeFi). It is an industry that is emerging very quickly. More and more crypto and blockchain projects are working with DeFi. We are happy to explain what Tellor is, how it works and why Tellor is used. You will see which problems can be solved with Tellor!
What is Tellor (TRB)?
This oracle makes it possible to forward information/data from the “real” world (also called off-chain data) to smart contracts. For example, it is possible to use data from the outside world to check whether certain conditions of a smart contract have been met. See a 12-minute video below that explains what Tellor actually means.
Let’s give an example…
Suppose there is a smart contract that insures your plane ticket. This insurance ensures that you get your money back automatically and without human intervention (without having to file a claim) if your flight is delayed or cancelled. At this point the oracle will do its job. It retrieves data from airports (if the flight was delayed…) or from weather stations (if the flight was canceled due to a storm…). The oracle then forwards the information to the smart contract after which you will be refunded to your personal account.
Issues Solved by Tellor
Tellor wants to solve pricing problems for the DeFicccccc application. They are working on a safer and more transparent provision of data to the world of DeFi. This oracle is also a database for miners competing against each other, who will be the first to add a data point. We will tell you more about this later.
The TRB token (Tellor’s token) was created to create a good system. This token is used to pay Tellor Tributes to send certain information to the oracle. It is also the basis for rewarding miners.
Whenever a request is made, the oracle ensures that the highest paid search can be performed every 10 minutes by the relevant miner.
Another problem with DeFi is reliability. As you have seen in the example above, it could happen that someone provides incorrect information. As an application, you just have to assume that the data supplied is correct. Checking the data is therefore also one of the problems.
How does this Tellor solve problems?
Tellor Oracle is an on-chain database where miners compete to add data points. To create a suitable incentive system, Tellor uses the TRB token. The parties pay TRB to send the data request to the oracle.
Based on the reward awarded per request, the oracle chooses the best sponsored query every 10 minutes to create a challenge for miners and thus to solve. Each query collects specific data (e.g. BTC/USD price) and passes this data on to the chain.
How does Tellor work?
It will all become clearer to you once you understand how Tellor works. First, the user will send a query to Tellor with TRB to encourage miners to choose this query over other queries. In fact, it is a kind of auction. There may be other users who want the same data. They pay or give a tip for that dataset, in order to encourage the miners even more.
Every 5 minutes, Tellor’s smart contract selects the best-funded searches and offers a new challenge for miners. Miners send their PoW solution and off-chain data points to the Tellor contract. The Tellor contract sorts the solutions as they appear and once it has received 5 solutions, the official solution (the average of 5 solutions) is chosen and stored on the blockchain. Miners then receive their payout.
It is of course also possible that someone provides incorrect information. The network can vote on that. The day after the vote, the convicted person can contest the result by paying a high revocation fee. If it turns out that the data supplied was wrong, the miner loses the case. If it turns out that the miner was right, he will receive an extra reward.
The oracle can ask miners for new data every 10 minutes. The miners then send the data to be merged by 5 different miners. An average is made between the 5 data and the miners share the reward of the request. Miners are incentivized to provide reliable data in two ways:
- They earn TRB tokens for every search that is processed
- They must store a certain number of TRB tokens to be eligible for query resolution.
- If the miner’s data is not validated or erroneous, he will be penalized and the number of TRB tokens he stakes will be taken by the network. Tellor has therefore opted for a hybrid system that makes it possible to reward and punish an unreliable miner.
The number of TRB tokens to be wagered to qualify is 1000 tokens. That amounts to a significant amount of money that miners cannot afford to lose by adding false information to the blockchain.
Especially since the oracle doesn’t use one resource and everyone wins by challenging a miner. Any holder (owner of tokens) can contest data added to the oracle and in return earn TRBs if a consensus is reached among holders who vote for the correction of the data.
You can therefore also see this as a security model where it would cost 1000 TRB per block to hack the Tellor network. The more confirmations of the data, the more reliable the data is, as this means that no one has questioned the data. Since anyone can challenge submitted data and be rewarded if it turns out to be confirmed (we call this the ‘challenge’), it is unlikely that a false entry will remain untouched for long. This is a similar defense model to that of the Bitcoin blockchain, where the costs required to perform a double-spend attack are very high. And because the attack has to be profitable, it’s not worth it.
The team behind Tellor
The experienced team is one of the key points of its success. A close-knit team behind a project is one of the most important fundamental criteria for the sustainability of a project. Next is the choice of the security protocol, a hybrid solution between Staking and PoW, a method that has proven its effectiveness in resisting attacks (Sybil attacks) and ensuring the network’s longevity.
But who is on Tellor’s team? Tellor’s team consists of 3 main members:
- Brenda Loya (CEO)
- Michael Zemrose (co-founder)
- Nicholas Fett (CTO)
The CEO and CTO are experienced and are Ethereum developers. They also founded DAXIA. This is a company that created Ethereum derivatives and smart contracts. They are also both economists. The CEO has worked for the US government and the CTO has worked for the CFTC. The co-founder has more of an entrepreneurial profile, but has also worked at DAXIA.
So they are 3 different profiles, but very experienced in their field and know each other well because they have founded a previous company about Ethereum. So they know how to work together and how Ethereum works.
Reward for the Tellor team
It is also known as “Dev revenue share”. It means that 10% of the total revenue generated by miners goes to Tellor ‘s team wallet. That may sound weird and unfair, but it isn’t. This project has not done an ICO , or raised money in any other way. They set up the project with their own money. That is why this is their way of continuing to finance the project.
This is of course the most difficult model to start with, since you just have to be able to explain this to everyone. Yet it is also by far the fairest model to start with, because of course the project also has to be paid for.
Many people think that Chainlink and Tellor are very similar. That makes sense, because in fact both blockchain projects are working towards the same goal. Both projects ensure that off-chain data can be delivered to the blockchain.
ChainLink currently has more reliance on speed than on decentralization. LINK has only a few nodes that are identified and allowed to publish data to the oracle. Especially since nodes are very expensive, as you need a lot of LINK in your node to gain more trust.
The Tellor project team is focused on greater decentralization. Anyone with 1000 TRBs can set up a node and submit data to the oracle. Miners are anonymous and compete to provide the requested data.
Tellor also has a feature that allows token holders to dispute the data. If the challenge is legit, the challengers are rewarded. This is a feature that Chainlink does not have. See a video below explaining the difference between Chainlink and Tellor.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com