Blockchain & Crypto

Understanding Blockchain Oracles

As you continue delving deeper into the world of blockchain technologies, you will hear about “blockchain oracles.” These oracles have no relation to the cloud application company Oracle, but they provide a way by which the decentralized Web3 ecosystem can access existing data, legacy systems, new data, and advanced computations. 

When blockchain oracles and decentralized networks are combined, they can create hybrid smart contracts, allowing for on-chain and off-chain infrastructure to support decentralized applications or DApps, that can react to real-world events and interact with traditional systems. Oracles connect a blockchain to an input or an output.

Take, for example, a sports bet between Ann and Bill. Ann bets Bill $50 that the Cardinals will beat the Steelers. Ann and Bill put $50 (total $100) in a smart contract escrow. At the game’s finale, how does the smart contract know to whom it should release the funds?  This answer requires an oracle that will obtain accurate data about the game’s outcome from an off-chain source and provide it to the blockchain securely and reliably.  

Blockchain Oracles Defined

Blockchain oracles are entities connecting blockchains to external systems, allowing smart contracts to execute based upon the inputs and outputs the oracles transfer to and from the real world.

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