Reality.eth

Reality.eth is a decentralized oracle protocol that allows smart contracts to securely obtain answers to binary (yes/no) questions about real-world events. It operates as a prediction market and dispute resolution system, where users stake cryptocurrency on the correct outcome of an event, and the final answer is determined by a decentralized consensus of token holders. This mechanism provides a trust-minimized way to bring off-chain data and events onto the blockchain, acting as a truth machine for decentralized applications (dApps).

The core mechanism involves a bonded question process. When a smart contract needs an answer, it posts a question to the Reality.eth contract along with a bounty. Users, called oracles or reporters, then submit answers by depositing a bond. After a predefined timeout period, the answer with the largest bond is tentatively accepted. This outcome can be challenged during a subsequent dispute period, triggering a fork of the native token (e.g., REALITY.eth tokens on Ethereum) where holders vote to determine the final, canonical answer, with incorrect challengers losing their bonds.

A primary use case for Reality.eth is decentralized arbitration and conditional payments. For example, it can be used to escrow funds for a freelance contract, releasing payment only when Reality.eth confirms the work was satisfactorily completed based on community adjudication. It is also integral to prediction market platforms like Augur, which use it to resolve market outcomes on events ranging from sports to politics. This makes it a foundational piece of infrastructure for any application requiring event-driven execution or verified real-world data.

The protocol emphasizes security through economic incentives rather than relying on a single trusted data source. The bonding and dispute resolution model makes it costly to provide false information, as malicious actors risk losing their staked funds. Reality.eth is blockchain-agnostic in design, with implementations on Ethereum, Gnosis Chain (formerly xDai), and Polygon. Its open-source nature allows developers to integrate its oracle functionality directly into their smart contracts for customizable, real-world conditional logic.

Compared to other oracle solutions like Chainlink, which typically pull data from authenticated APIs, Reality.eth specializes in subjective or difficult-to-automate questions that require human judgment or consensus. It doesn't fetch data feeds but rather facilitates a decentralized process to determine an answer. This makes it uniquely suited for dispute resolution, governance decisions, insurance claim adjudication, and resolving prediction markets where the "truth" is not merely a data point but an agreed-upon outcome.

At its core, Reality.eth is a decentralized oracle that answers binary (yes/no) questions about real-world events, such as "Did Team A win the match on date X?" or "Was the contract condition fulfilled?" The protocol does not fetch data itself but instead creates a cryptoeconomic game where participants are incentivized to report the truth. A user, known as the question creator, posts a question with a bounty and a timeout, initiating the resolution process. This mechanism is essential for bringing off-chain information, or real-world data, onto the blockchain in a trust-minimized way.

The resolution operates through a Schelling-point game. After the question's timeout expires, participants submit what they believe is the correct answer, staking ETH or the network's native token as a bond. The final answer is determined by a simple majority of the bonded submissions. Participants who report the consensus answer split the bounty and have their bonds returned, while those reporting minority answers lose their bonds. This design leverages the Schelling point concept—the idea that people will naturally coordinate on an obvious, focal answer when they lack communication, which in this context is assumed to be the ground truth.

To ensure correctness and handle disputes, Reality.eth features a built-in appeal process. During a configurable appeal period, any observer can challenge the initially determined answer by staking a bond larger than the total bonds of the current answer. This triggers a new voting round, effectively asking "Is the currently reported answer correct?" This process can be repeated multiple times, with bond amounts doubling each round, making it economically irrational to appeal a clearly truthful outcome. The final, unchallenged answer after the appeal period becomes the canonical result that smart contracts can query and act upon.

Integrating with Reality.eth involves interacting with its smart contract using a question ID, a unique identifier generated from the question text and parameters. Developers use the askQuestion function to create a new query, and contracts can check the resultFor or getFinalAnswer functions to retrieve the resolved outcome. The protocol is chain-agnostic, with deployments on Ethereum, Gnosis Chain, Arbitrum, and Polygon. Its minimalistic design makes it particularly suited for conditional transfers, prediction markets, and dispute resolution in decentralized applications.

The project's name, Reality.eth, was coined to describe a decentralized oracle specifically designed to resolve questions about real-world events and subjective outcomes. The .eth suffix immediately anchors it within the Ethereum blockchain's namespace via the Ethereum Name Service (ENS), signaling its native Web3 identity. The 'Reality' component refers to its core mission: to bring verifiable facts from the physical world—'reality'—onto the blockchain, enabling smart contracts to execute based on external truth.

The history of Reality.eth is intrinsically linked to the evolution of decentralized oracles and the need for secure dispute resolution. It was created as a fork of the Reality Cards platform, which itself was an early experiment in prediction markets. The key innovation was the development of a crowdsourced arbitration model, where a decentralized network of participants, known as Reality.eth oracles, could vote on the correct outcome of an event. This mechanism was formalized into a standard, ERC-1497, which defines a framework for evidence-based dispute resolution.

A pivotal moment in its history was its adoption by the Kleros decentralized court system as its primary oracle for sourcing real-world data. This partnership cemented Reality.eth's role as a critical truth layer for DeFi, insurance, and governance contracts that require off-chain information. The system gained significant traction for resolving conditional payments, insurance claims for flight delays, and the outcomes of real-world sports events, proving the viability of its decentralized arbitration model.

The development trajectory of Reality.eth showcases the blockchain industry's iterative approach to solving the oracle problem. It moved beyond simple data feeds to a more robust, game-theoretically secured system where truth is determined by a staked, decentralized consensus of participants. Its history reflects a broader shift from trusted single sources to cryptoeconomic security models for verifying real-world events.

Today, the legacy of Reality.eth lives on through its open-source codebase and the continued use of its arbitration standard. It stands as a historical milestone in oracle design, demonstrating how decentralized networks can be incentivized to converge on a single, reliable answer to a subjective question, thus enabling a new class of real-world smart contracts.