👋🏻 Welcome! This article was written by RedStone's community ambassador, fwf. Enjoy reading it!
Security, minimizing the risks of manipulation, real-time data updates and much more is provided by data aggregation, which is why it is considered an integral part of any Blockchain Oracle. And already Oracle acts as a bridge between networks in blockchain and the real world, providing smart contracts with external information.
🤔What is data aggregation?
Data aggregation is the process of collecting data (often from multiple sources) to produce high-level summary information that can be used for statistical analysis. An example of simple data aggregation is determining the amount of sales in a particular product category for each region in which you operate. Such a statistical summary makes it easier to analyze large amounts of data. Common data aggregations include sum, average, maximum, minimum, and quantity.
Data aggregation works like "synthesis", its main goal is to create a whole from multiple values.
Data aggregation is very commonly used in databases with data.
📝 In database management, there is a very useful tool called median. An example of using the median:
Suppose you have a huge database with personal data of more than one billion people. A person's gender, age, place of birth, it all gets confusing with so much information, so you need structure here. Let's do the same "synthesis" (i.e. create something whole from a set of values), count one category (e.g. salaries) in the database and create a median value of all salaries using the aggregate function. If necessary, you can use this function to select other categories as well: industry type, person's gender, and more.
♻️How is RedStone processing the data?
RedStone uses different methodologies to aggregate the data, which are called "median, TWAP (Time-weighted Average Price), LWAP (Liquidity-Weighted Average Price) and VWAP (Volume-weighted average price)".
📈Median price value
There is another approach, which uses a median value calculation. It’s way better than the average value and definitely more resistant to manipulations by corrupted sources. However, even this method cannot be considered a perfect way to calculate price value. As an example, assume that you take the same ETH/USD value from one large crypto exchange ($100m daily trading volume on ETH/USD market) and 4 small ones (~$10k daily trading volume on ETH/USD market), and the large exchange provides value $2000, but all the small ones — less than $1900. Then the aggregated median value, in this case, will be less than $1900, but, as you can guess, it’s not close enough to the “real” market value.
(From blog of RedStone).
🔑 What opportunities Oracles have with the use of data aggregation:
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🔐 Improved security - Collecting data from trusted authorized sources contributes to the overall security of blockchain-apps and protects assets and users from potential vulnerabilities;
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✅ Reliable information source and consensus assurance - Gathering information from multiple sources ensures accuracy and reliability. RedStone does the same, it increases the reliability of information for smart contracts;
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🛠 Support for Complex Smart Contracts - As smart contracts become increasingly complex, they require diverse data sets. Aggregated data collection allows Oracles to provide information to execute complex smart contracts;
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⚡️Real-time data feeds - Aggregated data allows Oracle to provide smart contracts with real-time information so they execute quickly and accurately;
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💎Minimize the risk of manipulation - By collecting data from multiple sources, RedStone minimizes the risk of manipulation. If a single source is used, it may be susceptible to malicious attacks. Data aggregation protects against such risks.
By collecting, verifying and providing accurate information from a variety of sources, Oracle facilitates the integration of blockchain technology with real-world data and contributes to a more robust and decentralized ecosystem.
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