‘Pure’ DeFi Faces Challenges for Real-World Application Due to Oracle Dependency: BIS

The requirement for an oracle in decentralized finance (DeFi) presents a significant barrier to real-world adoption, as noted in a recent bulletin by the Bank for International Settlements (BIS). The challenges associated with oracles are both practical and theoretical, and the authors of the study found no feasible solutions to these issues.

Oracles serve as intermediaries that supply real-world data to DeFi protocols. Their centralized nature undermines the decentralization of these protocols, which can compromise trustlessness—one of the foundational principles of DeFi. The authors expressed concern that this limitation could be a critical drawback for the integration of real-world assets into DeFi systems.