From Oracle Choice to Oracle Lock-In: An Exploratory Study on Blockchain Oracles Supplier Selection

Abstract: As data is an essential asset for any Web3 application, selecting an oracle is a critical decision for its success. To date, academic research has mainly focused on improving oracle technology and internal economics, while the drivers of oracle choice on the client side remain largely unexplored. This study fills this gap by gathering insights from leading Web3 protocols, uncovering their rationale for oracle selection and their preferences when deciding whether to outsource or internalize data request mechanisms. The collected data covers more than 55% of the DeFi market cap and is obtained exclusively by protocol executives, board members, or delegates. Insights support the view that protocol choices are tied to technological dependencies, where immutability of smart contracts amplifies lock-in, preventing agile switching among data providers. Furthermore, when viable third-party solutions exist, protocols overwhelmingly prefer outsourcing rather than building and maintaining internal oracle mechanisms.