The Role of Oracles in Sports Betting

The integration of oracles into sports betting protocols has been a crucial development, enabling the transition from centralized sportsbooks to decentralized betting platforms. By acting as a middleware, oracles fetch real-world game outcomes and deliver them on-chain, thereby facilitating the execution of settlement code [1]. This is essential because blockchains are inherently incapable of accessing external data on their own, highlighting the need for a reliable and secure data feed.

Evolutionary Stages of Oracles in Sports Betting

The evolution of oracles in sports betting can be categorized into three primary stages, each addressing the limitations of its predecessor:

• Crowd Consensus (Augur): This initial approach relied on token holders voting on outcomes, ensuring a secure and decentralized process. However, it proved to be too slow for the fast-paced nature of sports betting, with studies indicating a significant delay in outcome determination [2].
• Decentralized Oracle Networks (Chainlink): This stage involved the aggregation of data from multiple professional APIs, such as Sportradar, via independent nodes. Chainlink's approach became the industry standard due to its reliability, speed, and resistance to manipulation [3].
• Optimistic Oracles (UMA): This method assumes data is correct unless disputed, which lowers costs for niche markets and improves overall efficiency [4].

Impact of Oracles on Sports Betting

The integration of oracles into sports betting protocols has effectively addressed the issue of trust by decoupling the entity holding the money from the entity deciding the outcome of a bet. However, it has also introduced new challenges, including latency and data costs, which have driven the migration of betting protocols to high-speed Layer 2 blockchains [5]. Furthermore, the use of oracles has enabled the creation of more complex betting markets, such as in-play betting and micro-betting, which have increased user engagement and revenue for betting platforms.