Centralized oracle network governance

If a decentralized oracle network is configurable by a centralized entity, its gover- nance is centralized. This may cause governance mistakes to go unnoticed, which may result in the data feeds misreporting even when the underlying APIs and ora- cles are functioning correctly. For example, the chainlink silver price data feed reported the gold price for a period of time due to a governance mistake caused by human error. Synthetix, a decentralized exchange for derivatives, was using this data feed at the time, resulting in some of their users exploiting the error for profit. Due to its inherent opaqueness, centralized governance allows the usage of substandard practices, which inevitably result in such consequences. However, the more glaring issue that this event has demonstrated is that a centralized governing entity can trivially use their authority to maliciously misreport.

The governing entity has the authority to recompose a data feed, which means switching oracles and their respective data sources in and out. This is required for long term maintenance of the data feed, yet it exposes the data feed user to a variety of abuses and attacks by the governing entity. Then, the users either have to trust a centralized governing entity, or the governance of the data feed has to be decentralized with incentives that favor security.

In the case where the data feed user feels they can trust a central governing entity completely, using a decentralized oracle network is irrational and the user would be better served by using a centralized oracle operated by the governing entity.Firstly, this centralized oracle would not have third- party oracles as an attack surface and would thus be more secure. Furthermore, a centralized oracle would provide much better performance in terms of availability due to the difficulty in coordinating a large number of oracle node operators, which sometimes causes data feed-level outages. Finally, the operating cost of such a centralized oracle would be far lower than an oracle network. Therefore, we contend there is no circumstance where centralized governance of oracle networks can be justified.