About Block Chain
Blockchain oracles are third-party services that provide smart contracts with external information. They serve as bridges between blockchains and the outside world.
Blockchains and smart contracts cannot access off-chain data (data that is outside of the network). However, for many contractual agreements, it is vital to have relevant information from the outside world to execute the agreement.
This is where blockchain oracles come into play, as they provide a link between off-chain and on-chain data. Oracles are vital within the blockchain ecosystem because they broaden the scope in which smart contracts can operate. Without blockchain oracles, smart contracts would have very limited use as they would only have access to data from within their networks.
It’s important to note that a blockchain oracle is not the data source itself, but rather the layer that queries, verifies, and authenticates external data sources and then relays that information. The data transmitted by oracles comes in many forms – price information, the successful completion of a payment, or the temperature measured by a sensor.
To call data from the outside world, the smart contract has to be invoked, and network resources have to be spent. Some oracles also have the ability to not only relay information to smart contracts but to send it back to external sources.
Many different types of oracles exist – how a blockchain oracle operates is entirely dependent on what it is designed for. This article will go through some of those designs.
Blockchain oracles may be classified according to their use case. The most common types are:
• Hardware Oracles:
Integrates with physical systems and technologies, providing real-world data for smart contracts. For instance, hardware oracles can communicate with RFID sensors used in various industries (automobile, pharmaceutical, supply chain, etc.)
• Software Oracles: most commonly used; retrieve online data from external programs and web APIs - such as market prices, flight status, and weather data.
• Consensus Oracles:
sort of decentralized oracles that collects large amounts of data from a set number of other oracles, following specific methods to determine the validity and accuracy of data collected. Consensus oracles are being used in prediction markets platforms, such as Augur and Gnosis.
• Inbound Oracles:
transmits external data to smart contracts or software oracles. Can be configured as a set of "if" guidelines (e.g. “if an asset hits a certain price, place a buy order”).
• Outbound Oracles:
transmits smart contracts data to external systems, making it possible for smart contracts to communicate with non-blockchain sources.
