Publications
Publications
- 2023
Financial and Informational Integration Through Oracle Networks
By: Lin William Cong, Eswar Prasad and Daniel Rabetti
Abstract
Oracles are software components that enable data exchange between siloed blockchains and external environments, enhancing smart contract capabilities and platform interoperability. We find that oracle integration is positively associated with total value locked and platform/protocol valuation, triggered by positive network effects in adoption and usage. Our study reveals symbiotic gains from enhanced interoperability and network effects across protocols on a given chain and among integrated chains. Oracle integration improves risk-sharing and mitigates contagion, increasing resilience during turbulent periods in crypto markets. We draw parallels between oracle integration and international economics, offering insights for regulators, entrepreneurs, and practitioners in decentralized finance.
Keywords
Decentralized Finance; Blockchain; Smart Contract; International Economy; Interoperability; Risk Sharing; Applications and Software; Financial Markets; Economics; Risk Management
Citation
Cong, Lin William, Eswar Prasad, and Daniel Rabetti. "Financial and Informational Integration Through Oracle Networks." Working Paper, December 2023.