Tellor (TRB) is a decentralized oracle protocol that strives to bring off-chain data on-chain. It functions by encouraging data reporters to supply accurate data on-chain, while also discouraging inaccurate reports through a system of disputes and slashing. The protocol is permissionless, meaning anyone, anywhere in the world, can become a data reporter using open-source software. Tellor's native token, Tributes (TRB), is used to align the interests of data reporters, oracle users, and community governance. The protocol aims to be flexible and robust, with the potential to support a variety of blockchain applications.

Tellor functions by encouraging data reporters to supply accurate data on-chain. When oracle users request the value of an off-chain data point, data reporters compete to add this value to an on-chain data bank, accessible by all smart contracts on the networks Tellor supports. The frequency with which data can be updated is limited only by how much and how often users "tip" the feed with TRB. Security is intended to be achieved through Tellor’s governance contract, which uses a simple dispute mechanism to achieve community consensus on the data being reported. Data reporters must stake TRB in order to report data and earn rewards, but they can be disputed and slashed, with their stake given to the disputer if they submit data the network deems incorrect.

Tellor strives to provide a solution for the "oracle problem" in the blockchain space, where off-chain data needs to be brought on-chain for smart contracts to use. This makes it potentially useful for a wide range of decentralized finance (DeFi) applications that require access to real-world data. For instance, a DeFi lending platform might use Tellor to access up-to-date price information for various cryptocurrencies, enabling it to adjust loan terms in real-time. Similarly, a decentralized insurance platform could use Tellor to access data about real-world events, such as weather conditions or flight delays, in order to process claims.

Tellor was launched in 2019 by a U.S.-based team consisting of Brenda Loya, Nick Fett, and Michael Zemrose. The team addressed the oracle problem on the Ethereum blockchain. Prior to founding Tellor, the team members had diverse backgrounds in blockchain, economics, regulation, and machine learning. The protocol has since expanded to support multiple networks, including Ethereum, Polygon, and Algorand. The Tellor network aims to be secured through its native token, Tributes (TRB), which aligns the interests of data reporters, oracle users, and community governance.

In the context of smart contracts, which are self-executing contracts with the terms of the agreement directly written into lines of code, Tellor's role is to supply these contracts with real-world data that they can't access on their own. This is crucial because smart contracts, while powerful tools for automating processes and enforcing agreements, are not capable of interacting with data outside of their network. Tellor addresses this limitation by acting as a bridge between smart contracts and off-chain data sources, enabling smart contract decentralized applications (dApps) to execute based on real-world conditions and infrastructure. This functionality is particularly important in areas such as decentralized finance (DeFi), where up-to-date, data with a focus on integrity is essential for the accurate execution of financial contracts.

Tellor strives to uphold data accuracy and integrity in its oracle system through a decentralized and permissionless network of data reporters and validators. Individuals may participate as data providers in the network by allocating Tellor tokens (TRB), which may be deducted if they submit inaccurate information. This mechanism encourages data providers to submit accurate data. When a data point is submitted, any participant can dispute its accuracy, triggering a vote among all participants to determine its validity. If the data point is found to be incorrect, the provider may have a portion of their allocated Tellor deducted. This mechanism of acknowledgments and deductions, combined with the transparency of the blockchain, aims to uphold the accuracy and integrity of data in the Tellor oracle system.

The TRB token is the utility token of the Tellor system. It is an ERC-20 token based on Ethereum and plays a vital role in the Tellor ecosystem. TRB is used as a form of non-monetary incentive for miners who provide accurate and reliable data to the network. Miners stake TRB tokens as collateral against the accuracy of the data they provide. If they submit inaccurate information, their staked tokens may be affected. This mechanism aims to ensure the reliability of the data provided within the Tellor ecosystem. TRB tokens also facilitate data requests within the network. Users who need specific off-chain data can request it by using TRB tokens.

On the Tellor network, miners play a crucial role in submitting and validating data. They place a commitment and report data, and for a certain period, anyone can challenge any piece of data by paying a dispute fee. Tellor stakeholders then vote to determine the outcome of the dispute. If the data reporter loses the dispute, their commitment is transferred to the disputing party. This system aims to penalize non-compliant participants and acknowledge compliant ones. Miners participate via a Proof of Work (PoW) mechanism to provide the requested data. The Tellor oracle provides the requested data based on the median of the five most efficient PoW miners. The data can be disputed, and the miner's role is to provide accurate data to fulfill data requests. To do this, miners must solve Tellor’s PoW algorithm, a computationally intensive mathematical problem. Miners receive TRB, Tellor’s native cryptocurrency, as a non-monetary incentive for their participation. The more miners participate in providing data, the more complex the PoW problem becomes, necessitating miners to contribute more computational power to receive TRB as a non-monetary incentive.

Tellor strives to address the challenges of oracle centralization and manipulation by utilizing a network of staked participants. These participants compete to solve a Proof of Work challenge and submit the solution along with requested data. Tellor employs game theory and crypto-economic incentives with the aim of maintaining the security of the system. This approach is designed to make it costly to manipulate the data and seeks to maintain liveness, even during periods of stress on the Ethereum network. Tellor has mechanisms in place to manage single-source dependencies, particularly for Liquid Staking Tokens (LSTs) with limited market presence. It is involved in the governance processes that shape the protocols they serve, with the intention of contributing to the integrity and stability of DeFi ecosystems.

Tellor oracles are designed to accommodate a wide range of data feeds and information to cater to the diverse needs of smart contracts. They are structured to handle any data type, from basic spot prices to more complex pricing specifications like Time-Weighted Average Price (TWAP) and Volume-Weighted Average Price (VWAP). Tellor oracles also have the capacity to accommodate custom data needs. If the data can be verified, Tellor intends to bring it on-chain. This flexibility is intended to cater to a diverse array of applications, including those within the decentralized finance (DeFi) sector. The protocol is designed to facilitate an open, permissionless network of data reporting and data validation, with the intention of enabling data provision and verification by any participant.

Tellor's dispute resolution mechanism is a key governance feature in its system. It allows any party to challenge the data submissions of reporters when a value is placed on-chain. To initiate a challenge, a dispute initiation process must be undertaken. Once a challenge is initiated, the reporter who submitted the potentially incorrect value is placed in a locked state for the duration of the vote. Over the next few days, Tellor token holders vote on the validity of the reported value. The duration of the voting period increases with each round, up to a maximum of six days. This mechanism plays a role in maintaining the integrity of the Tellor oracle, as it encourages all token holders to ensure the accuracy of the data. It aims to act as a deterrent against malicious activity, as reporters face the consequence of their reporting privileges being revoked if they submit data that is successfully disputed.

Tellor encourages miners and users to participate in its network through a system of non-monetary incentives and penalties. Miners, who provide off-chain data to the network, are required to stake Tellor's native token, TRB, to participate. They then receive TRB for providing accurate data. If they provide inaccurate data, they risk losing their staked tokens. This system aims to encourage miners to provide accurate and timely data, aiming to maintain the network's reliability. Users, on the other hand, pay for data requests using TRB. As demand for data increases, so does the potential value of TRB, potentially encouraging more user participation in the network.

Tellor strives to address scalability and transaction cost concerns by utilizing a decentralized oracle protocol. Tellor's mechanism includes three crucial steps: data request, data submission, and token incentives. In the data request phase, smart contracts request data and send it to the oracle. In the data submission phase, the data is placed in a pending data pool, and miners verify and submit the data through a proof-of-work-based consensus mechanism. This process is crucial as inaccurate data sources can potentially impact the entire contract if not thoroughly validated. In the token incentive phase, randomly selected validators verify the submitted data, record the correct data on-chain, and publish it to the smart contract. Tellor leverages the TRB token incentive mechanism with the intention of encouraging timely and accurate submission and verification of data. This decentralized data request method is designed with the intention of mitigating risks associated with human manipulation and fraudulent behavior. Additionally, Tellor's protocol is designed to accommodate a variety of applications, such as data aggregation and sorting between multiple datasets, with the intention of broadening its potential application within the blockchain field.