Introducing Overlap

In the world of decentralized finance (DeFi), transparency and verifiability are fundamental. As Ethereum’s founder, Vitalik Buterin, famously said, “Code is the law.” This means that everything occurring on a blockchain is an immutable truth, verifiable by anyone. Need to confirm a transaction? Check the blockchain. Want to know if founders hold tokens? The blockchain has the answer. Curious about the outcome of decentralized governance? Again, it’s all on the blockchain.

However, while on-chain activities are fully transparent, blockchains also rely heavily on off-chain data. Many DeFi applications, such as lending platforms, need real-time asset prices. Other scenarios might require knowing if a real-world event occurred — like a decentralized insurance fund verifying a flood or election results. Prediction markets are also on the rise, with platforms like Polymarket seeing nearly $500 million in monthly volume, as people bet on various outcomes in a decentralized, trustless manner.

But this brings up an essential question: How do decentralized applications (dApps) verify off-chain events? This is where oracles come into play. Oracles serve as the single source of truth for off-chain data in the DeFi ecosystem. For an oracle to be trusted, it must ensure that participants are incentivized to provide accurate data. The cumulative market for oracles now exceeds $10 billion, with Chainlink leading the pack. Chainlink has set the standard by providing reliable data feeds for crypto asset prices and even generating verifiable randomness. Other notable oracles include Pyth Network, Band Protocol, and UMA. These oracles are crucial for bridging the gap between decentralized finance and the real world.

Introducing Overlap

So, where does Overlap fit into this landscape? Overlap is an oracle that aims to democratize decentralized governance and dispute resolution, making it accessible and fair for everyone. Many existing systems rely heavily on the votes of a select few who have significant stakes in the system. In these setups, the truth often comes from those with the most to lose — or gain. This centralization can lead to situations where the truth is influenced by the interests of the wealthy.

Overlap seeks to address this issue with a more sophisticated design that simulates a better version of representative democracy. In Overlap, there are two types of participants: holders and jurors. Holders are individuals who own Overlap’s native token. Jurors are holders who register to participate in the truth-validation process. Every holder can elect a juror as their representative, or they can become a juror themselves. Like in a typical democracy, jurors compete for votes from holders. The top jurors with the most votes are eligible to vote in upcoming truth assessments.

But that’s not all. To ensure continuous fairness, a performance-driven weight is assigned to each juror. This weight increases or decreases based on how their decisions compare to the majority of jurors in the same assessment. Jurors with lower weights are less likely to be elected in future assessments due to a carefully designed weighted-randomness function. This system puts constant pressure on jurors to maintain high performance. Lower weights mean less participation in the protocol, leading to fewer rewards. As rewards decrease, voters are incentivized to choose more reliable delegates, ensuring that the system remains fair and efficient. This system is further strengthened by standard staking and slashing mechanisms for the jurors, to reinforce the result and its Schelling point.

Why Overlap Matters

With this innovative design, Overlap aims to make decentralized oracles and truth validation more inclusive, not just for the wealthy but for everyone. Overlap is a democratic, merit-based, rewarding, and fair oracle system. It aspires to become the primary source of truth for all decentralized applications, bringing the off-chain and on-chain worlds closer together.

If you’re interested in learning more or want to participate in the upcoming incentivized testnet, join our Discord server and follow us on Twitter .