Tellor (TRB) – What is it? and How does it Work?

One of the major pitfalls of blockchain technology is the inability for blockchains to access off chain data in a trustless manner. This is called the ‘Oracle Problem’ and is what Tellor (TRB) and a handful of other blockchain projects are attempting to solve.

Solving the Oracle Problem is essential to creating true trustless and decentralized DeFi platforms. Currently many DeFi platforms rely on 3rd party data providers creating a centralized point of failure. If the data provided is inaccurate with malicious intent or not the consequences can be huge for these platforms.

Alongside Tellor in trying to solve the Oracle Problem are a number of well known projects. Such as Chainlink, Band Protocol, and others. But can Tellor compete?

In this article we will dive into the Tellor team, how Tellor works, the tech behind Tellor, the value of the Tellor token and more.

Tellor Selling Points

The Tellor Team

Tellors executive team hails primarily from an economics and business based background.

CEO of Tellor Brenda Loya, studied economics and was previously a supervisor with the U.S government.

CTO of Tellor Nicholas Fett, also studied economics and formerly worked for the Commodities Futures Trading Commission (CFTC) a regulatory body over looking U.S derivatives market. He now spends most of his time writing the code that shapes the Tellor project.

CSO Micheal Zemrose, comes from a business development background and worked as a small business consultant.

All 3 of them founded Tellor while making a previous project called Daxia. Daxia focused on creating open source software for Ethereum based derivatives contracts. They needed an oracle for Daxia and so Tellor was founded.

Tellor since October 2019 has been been invested and incubated by Maker, Binance Labs, and Consensys Grants.

Tellor Investors

How Tellor Works

To understand how Tellor works we must first understand what an oracle actually is. Blockchains by design are exist in their own silo living independently from other networks and blockchains. This is perhaps good for security but makes it incredibly different for blockchain applications to use real world data. This is what oracles aim to solve by allowing real world data be brought on to blockchains in a trustless manner.

Lets imagine a scenario where I am creating a trading platform on the Ethereum network. I want to let users bet on the price of Bitcoin, so for example if Bitcoin reaches 20000$ by the end of 2021 I will pay out 100 ETH. But how do I code the price of Bitcoin into an Ethereum contract?

Well you can’t there is no command you can use to pull the price of Bitcoin. You could use a 3rd party data provider but this completely removes the trustless and decentralized nature of your application. By using an offchain data provider you’re creating a single point of failure within your smart contract. If the data they provide you with is faulty your smart contract could be drained losing you thousands of dollars.

This is where Oracle comes in. The dictionary definition of an oracle is a “person who gives wise or authoritative decisions or opinions” and in the realm of smart contracts this is the same. Instead of going to the 3rd party data provider I can go to the Oracle and get data in a trustless and decentralized manner.

How the Oracle Works

Now that we have established the theory of what an oracle actually is how is it implemented in practice? The process is explained succinctly in the Tellor Whitepaper.

  1. A user submits a query (data request) to the Oracle using TRB. This incentivizes miners to choose this query over others.
  2. If other users want the same data they can tip the query to further incentivize selection by miners.
  3. Every 10 minutes the oracle selects the best funded query and provides a new challenge for miners to solve.
  4. Miners submit their PoW solution and off-chain data point to the oracle contract. The oracle contract sorts the values as they come in and as soon as 5 values are recieved the median value is selected and saved on-chain. Miners are then allocated their payout of TRB
  5. Anyone holding TRB can dispute the validity of a mined value within 24 hours of it being mined. To do so the disputer has to pay a dispute fee. Tellor token holders then vote on the validity of the data. If the data is deemed to be false, the miner will lose their stake. If the values are correct the dispute fee is given to the miner.
How The Oracle Works

The Tech Behind Tellor

The tech that secures Tellor is a hybrid Proof of Work (PoW) and Proof of Stake (PoS) model. To begin mining on Tellor miners must first stake 1000 TRB. This acts as an incentive against malicious miners feeding bad data points. If after a network vote a miner has been found to have provided bad data their 1000 TRB is taken and their miner status is revoked. This process is carried out through the dispute process.

The interesting part of Tellor is that anyone who holds TRB can file a dispute with a data point. This encourages users to get involved but also ensures that data points are accurate. The lower the barrier to making a dispute the better it is for the network as a whole.

If however the miner works well and provides good data they will earn rewards, again in the form of TRB.

While many chains move away from the PoW model in favour of a PoS model Tellor is using a hybrid system. The reason Tellor outlines for using this system is to both prevent large miners from over running the network and to better align the incentives of data providers with the success of Tellor.

The Value of the Tellor Token

The Incentivisation structure for holding Tellor is multi-faceted. First and foremost is requesting or querying the network for off-chain data. This is the backbone of the network. In order to request data from Tellor you must first hold Tellor. This encourages developers of DeFi applications to buy Tellor in order to get the off-chain data they need in a trustless manner.

The second major incentive is miners. In order to be a miner on Tellor you must hold 1000 TRB. This encourages miners to buy TRB so they can earn future rewards down the line. If the price of TRB is to increase the number miners wanting to get involved will increase. Again driving up demand for TRB.

Demand for Tellor is also stimulated by the tipping system. If multiple users need the same data they can tip an existing query with TRB. This incentivises miners to select that query.

Finally to use the dispute system users must also hold TRB.