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QED.NETWORK AMA RECAP

With MoonBoots on Sept 27th, 2021

Smart contracts resident on blockchains or other decentralised platforms offer the prospect of huge efficiency increases in the management of commercial and legal transactions both in the conventional person-centered economy, and in the emerging machine-to-machine economy.

Through their automatic operation, smart contracts hold out the crucial benefit of absolute certainty about execution, so that the threat of non-compliance is made, in effect, mathematically impossible.

This major benefit has led to intense interest in smart contracts in a whole range of areas, from the financial economy to smart supply chains to the Internet of Things. However, there is one potential weakness which has so far held up the practical deployment of smart contracts. The triggers of such contracts must ultimately depend on factors outside the contract itself, outside the blockchain or platform it sits on and in the real world. For smart contracts to work, it is necessary for real-world information to be brought into them in order to meet the execution criterion. This crucial function is performed by oracles, protocol-based methods for transferring information from the external world into the blockchain/platform-based smart contract.

The major problem facing the development of smart contracts is that up to now customers have had simply to rely on the good faith and accuracy of the relevant oracle or oracles, with no means either of verifying their reliability or of securing recourse in the event that they prove unreliable.

All this is now changing as smart contracts enter a second generation with the revolutionary introduction of decentralised oracle reliability verification in the form of the QED Oracle protocol.

We had the pleasure of being joined by QED.Network Architect Daryn Soards. Daryn’s career started as a derivatives trader at Salomon Brothers. He worked for several years as a proprietary trader at Deutsche Bank and managed the global special situations portfolio at Marshall Wace Asset Management. Having realised he was not cut out to be an employee,he set out on his own advising mainly on complex restructuring situations and investing in esoteric or unloved assets. His contrarian approach, disruptive nature and strong commercial mindset allows him to be very comfortable in the crypto asset class.

Miami Disco
Let’s begin our AMA with QED.
Welcome, Daryn!

Daryn 0rigin CEO
Thanks, Disco, a pleasure to be here.

We build Layer 1 type infrastructure leveraging our teams’ deep knowledge of DLT on pieces of the puzzle that will ultimately set the foundations for enterprise adoption. There is no lack of interesting technology in this space. There is a lack of understanding about general commercial principles that will need to be embedded in decentralised systems before any serious scaling can be achieved.

We write token models for third-party protocols where we see a symbiotic relationship with our long-term strategy. Our approach to token models starts with the business model as the primary driver where we define complementary token utility that optimises the adoption curve over the long term rather than the flavour of the month crypto-centric tokenomics.

Additionally, we run capital in our 0rigin Principal arm across the whole blockchain asset-class employing a variety of strategies to capture medium to long-term returns for our shareholders.

QED came about as a result of all three activities

We built Oracle software about two years ago to operate across EOSIO chains which has been very successful. Having been in the business so to speak, we saw at first hand the commercial imbalance between Oracles and customers and this is never tenable in any industry. In the short term, this can be very profitable but it can never scale.

QED addresses the issues of commercial risk, dynamic optimisation of system accuracy and dispute resolution encapsulated on UX Network smart contracts. There is no human subjectivity such as arbitration, no off-chain entities and no centralised management or single points of failure.

It is fairly obvious/known at this stage that blockchains need Oracles to reach their full potential…. QED provides the solution to the Oracle dilemma.

Daryn 0rigin CEO
OF Course.

Once a truly trustless smart contract has released transaction value, errors are irrecoverable through code. We took the view that a mechanism need to be implemented that allows for restitution, but such action needs to adhere to the principles of smart contracts and decentralisation itself…

If you introduce off-chain mechanisms and actors, it really becomes a very different exercise… That is not to say there is not room for those types of systems, since everything has to be fit for purpose. However, QED is designed primarily to integrate with decentralised networks and in that regard, its value proposition includes maintaining the fundamentals of distributed systems.

This is significant economically since QED now allows, and naturally benefits from, true scaling of blockchain activity.

Daryn 0rigin CEO
We inverted the problem.

Rather than chasing recovery post-event, in QED, Oracles bond collateral upfront and a claims process can be implemented post-execution. There is a claim and resolution process that all happens on-chain using accuracy ratings and incentives to underwrite the system.

Daryn 0rigin CEO

No. This is a really important distinction on QED actually.

QED uses external collateral, meaning the token itself will not be used for collateralising the Oracles.

Collateral is user-defined in the contract between QED Oracles and their customers, meaning as a customer/DApp you decide what you think is a suitable form of collateral.

Daryn 0rigin CEO
When system tokens are used as collateral, it can lead to a death spiral effect in the event of a systemic shock. In such a situation, QED collateral would not be impaired. I mean QED could be used as collateral if Oracles and customers wanted to use it but it’s not the primary use case for the token..

Daryn 0rigin CEO
haha, hadn’t thought of it as a killer feature..

I simply think of recourse as a mandatory piece of the Oracle puzzle that allows two counterparties to contract in an equitable environment….

It’s only then that you can achieve fair market pricing, elasticity and behaviour that can allow systems to reach their potential market.

Daryn 0rigin CEO
for me, I love the commercial architecture and the simple game theory behind the model.

There’s a really easy link between Oracles getting paid more for being more accurate using an active scoring system. The most successful Oracles financially will achieve the best return on collateral by being the most accurate. Capital efficiency drives the system in the direction the system needs to go in. That’s all you can ask for in any business.

The accuracy analysis is quite complex mathematically and luckily we have a great team on board (not me!) developing that for various Oracle products to standardise accuracy but allow for product and market context.

QED is packed full of the best technological features that exist in the market. Examples include the bidirectional trustless bridge I mentioned earlier, sub-second finalities, ultra-low deployment, and running costs, chain agnostic design, portability through the UX Network, an EVM for DApps running on Ethereum, and so on…

Finally, I would say the token model has an elegantly simple utility function that binds it to the economic health of the wider system, keeping all the stakeholders aligned properly.

Daryn 0rigin CEO
I don’t really think like that.

The Oracle market is already vast but will only get larger as data permeates everything in this digital economy. There’s not going to be one winner or loser. There are many different products and solutions that are needed to meet very different requirements.

However, whilst QED is also a stand-alone Oracle protocol its economic system and token could in theory plug into any Oracle software. We see the potential in QED to become an aggregator of all Oracle systems bringing greater transparency and price discovery which in turn leads to greater adoption and more value in the system.

Daryn 0rigin CEO
In the past year alone there was over $1B worth of assets lost to Oracle and bridge-related hacks. If you are in crypto it is sort of a way of life that you get rugged a few times. That’s not going to wash with anyone vaguely serious in the real world. QED is a mechanism whereby there is commercial recourse that businesses and enterprise clients can rely upon and not be hung out to dry on a one-way ticket as we see and experience in DeFi presently.

I think DeFi is still very much crypto to crypto but the demand for products we are seeing tells me that will be changing very quickly. Our longer-term vision is to draw value from the centralised world into the decentralised world and QED takes us a substantial step closer to that goal.

Daryn 0rigin CEO
Not at all

Decentralised Finance is just the lowest hanging fruit and requires immediate attention. V1 of QED will launch for DeFi, but V2 will service a far greater cross-section of applications.

Daryn 0rigin CEO
In the early days of eBay, many people would not trust the site for expensive items such as electronics due to the absence of recourse or any type of guarantee for when a vendor stole their money, never sent the item, or the item was broken etc. The logic at the time was that most vendors would lose reputation and be blacklisted if they behaved maliciously. As it turns out, this model did not scale and Ebay in 2010 began upgrading to comprehensive buyer protection in the event of theft or fraud to the customer. The usage of reputation as credit has a ceiling on value as there is always a threshold where the trustee will switch. Nowadays, electronics represent the highest portion of categorised sales on eBay, sitting at over 16%, and eBay has 187 million users worldwide and almost $28B in value of listed items.

The integration of recourse mechanisms did two things for Ebay:

A. It created a level of reliability and trust for Buyers that had not been seen prior, driving customer satisfaction and repeat usage to unseen levels.

B. It widened their product range and allowed new marketplace categories to become their leading source of sales.

Recourse is more important and more valuable when building decentralised economies than it was to scaling Ebay. QED is the first Oracle protocol that provides this true recourse without sacrificing trustlessness or diminishing the balance sheet benefits of smart contracts. With QED, smart contracts will be suitable for commercial applications, which I think will eventually represent the most valuable portion of decentralised economies.

Daryn 0rigin CEO
So this really comes to the heart of the Oracle dilemma. How do we verify the information sent to smart contracts in a way that does not (1) rely on trust or reputation (2) slow down the execution of the smart contract such that it becomes useless as a technology to the customer?

Existing models deal with error claims pre-execution or have introduced adjudicating boards as independent third parties as a means for post-execution resolution. Neither of these options satisfy our two points.

Since QED is already collateralised for any claim and allows the most accurate Oracles in the system to act as resolution Oracles (again using capital efficiency incentives), we do not embed trust into the system via third parties, and we maintain execution speed such that smart contracts remain economically valuable.

Daryn 0rigin CEO
I mean I only know the superficial information, not aware of the technical details of the hack.

but basically, Pyth offers low latency Oracle price feeds for DeFi designed to service clients that might want to high frequency trade or similar — basically for quants at the moment it seems.. Their BTCUSD aggregate pair a week or so ago? Can’t really remember the date it was, went AWOL. It had been hacked and BTC prices on DeFi exchanges such as MangoMarkets went as low as $5,500/BTC causing mass liquidations. Users had and still have no way to recover their capital.

How would it work in QED?

A claim would have been made, Resolution Oracles would have concluded the initial oracle price feeds were erroneous and collateral bonds would already have been released to the affected clients.

Daryn 0rigin CEO
well to kick it off, QED as a system is all about accuracy.

That’s the driving economic factor for the success of the model. Whilst Oracles for any contract post equal collateral to participate they do not necessarily earn the same fees. The distribution of fees is related to their historic accuracy score that is constantly measured and updated. We add in time decay and collateral weighting as well to remove system gamification.

Simply put, the most accurate Oracles earn more as their fee allocation is higher. Poorly performing Oracles see their profit margins decline until they reach the threshold of redundancy. Resolution Oracles are the most accurate cohort and the goal of any Oracle is to perform resolution since the returns on collateral are higher. However, Oracles cannot be resolution Oracles in isolation and must maintain accuracy as normal Oracles which keeps the system honest.

Daryn 0rigin CEO
Its primary function is staking.

The result of QED staked in the system drives the collateral requirement for resolution Oracles. The more QED staked, the lower the requirement for resolution collateral.

This enables the system to dynamically fine-tune collateral and profit margins to fit accuracy and capital costs. The QED token can now fundamentally represent the capital value of system utility.

Daryn 0rigin CEO
the QED token is an ERC-20.

Daryn 0rigin CEO
The 0rigin story with QED is that we actually already built an extremely popular piece of Oracle software back in 2017, namely the DelphiOracle. QED is not a start-up. The basic smart contracts for the QED Oracles have more or less been battle-tested for over four years standing up to all manner of market conditions. This is also what I point out to people when they ask if we have had someone audit the smart contracts — something we put little stock in.

Daryn 0rigin CEO
It is the most used Oracle software for the WAX blockchain, with around 60,000 uses and just under 10,000 users every week. That is just on WAX and a lot of its usage can’t be monitored because it is hosted privately and open source. The price feeds you see on the website are DelphiOracles that have been running non-stop for around 4 years. They have pushed over 25 million data points in their lifetime and have never ceased to function all at once — even during the Crypto Black Thursday crash — and have never been hacked.

Daryn 0rigin CEO
We try our best to be pretty responsive and you can obviously reach out directly to the admins in Telegram. Our main channels are as follows

Daryn 0rigin CEO
best to clear this one up

I have already heard someone pronounce it “quid”, a slang term for a pound in England…

It’s a Latin phrase that’s used in maths to note when something has been proven…

Actually, my background is ancient languages but I ended up doing maths so it amused me to use it as it was so appropriate to Oracles.

Miami Disco
Thank you once again for dropping by. I and the rest of the chat wish you and your team good luck!

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