What is an Oracle? A crucial bridge between Blockchain and the real world

Blockchain, with its decentralized and secure nature, has revolutionized how we store and exchange data. However, there is a major limitation: Blockchain itself cannot access data from the outside world. This is where Oracles come in, serving as a crucial "bridge" that provides information from the real world to decentralized applications (dApps) on Blockchain.

What is an Oracle? Definition and role

An Oracle is an intermediary service that provides data from the real world to smart contracts on Blockchain. Smart contracts, with the ability to automatically execute according to pre-programmed conditions, require accurate and reliable data to operate effectively. Oracles are the trusted data providers.

Illustrative example:

Suppose you want to create a weather prediction dApp on Blockchain. Your smart contract needs data about temperature, humidity, rainfall, etc., from the real world to make predictions. The Oracle will collect this data from reliable sources (like weather stations) and provide it to your smart contract.

Why are Oracles important for Blockchain?

  • Connecting to the real world: Oracles help Blockchain interact with the outside world, expanding the applications of this technology.

  • Providing reliable data: Oracles ensure the accuracy and reliability of data, helping smart contracts operate effectively.

  • Enhancing the applicability of dApps: Thanks to Oracles, dApps can access various types of data, from asset prices to sports event results.

Types of Oracles

Oracles can be classified according to various criteria:

1. By data source:

  • Hardware Oracles: Collect data from physical devices such as sensors, barcode scanners.

  • Software Oracles: Collect data from online sources such as websites, APIs.

2. By data direction:

  • Input Oracle: Provides data from the real world to Blockchain.

  • Output Oracle: Sends data from Blockchain to the real world.

3. By level of decentralization:

  • Centralized Oracle: Data is provided by a single source.

  • Decentralized Oracle: Data is aggregated from multiple sources.

The mechanism of Oracle operation

  1. Data request: Smart contracts send data requests to Oracles.

  2. Data collection: Oracles collect data from predefined sources.

  3. Data validation: Oracles validate the accuracy and reliability of data.

  4. Data provision: Oracles provide data for smart contracts.

  5. Executing smart contracts: Smart contracts use data to perform programmed actions.

Security issues of Oracles

  • Single point of failure: Centralized Oracles can become a single point of failure, impacting the entire system.

  • Data manipulation: Oracles can be attacked or manipulated to provide misleading data.

To address these issues, decentralized Oracle solutions are being developed.

Before reading the list of coins, I recommend that you register and verify your Binance account to start investing, register here

Top 9 outstanding Oracle projects on Binance

  1. Chainlink (): Chainlink is the leading decentralized Oracle network, providing reliable data for many dApps on various Blockchains.

  2. Band Protocol (BAND): Band Protocol is another decentralized Oracle that allows users to create and manage their own data sources.

  3. API3 (API3): API3 directly connects APIs with smart contracts, eliminating the need for intermediaries.

  4. DIA (DIA): DIA is an open-source Oracle that allows users to collect, validate, and share data.

  5. Tellor (): Tellor is a decentralized Oracle that uses a "Proof of Work" mechanism to incentivize users to provide accurate data.

  6. Nest Protocol (NEST): Nest Protocol is a decentralized Oracle that uses a "quote mining" mechanism to ensure the accuracy of price data.

  7. Pyth Network (): Pyth Network provides financial market data with low latency, supported by large financial organizations.

  8. WINkLink (WIN): WINkLink is a decentralized Oracle focused on the gaming and entertainment industry.

  9. Oracle (ORCL): Oracle is a new Oracle project on Binance Smart Chain, providing data for DeFi dApps.

Preliminary assessment:

  • Chainlink: Market leader in Oracles with a vast network and high reliability.

  • Band Protocol: Provides flexible solutions for users to create and manage Oracles.

  • API3: Directly connects APIs with smart contracts, increasing efficiency and reducing costs.

  • DIA: An open-source platform that promotes community involvement.

  • Tellor: Uses a "Proof of Work" mechanism to ensure data accuracy.

  • Nest Protocol: Unique "quote mining" mechanism focused on price data.

  • Pyth Network: Provides high-quality financial market data.

  • WINkLink: Focused on the gaming and entertainment industry.

  • Oracle: A promising new project on Binance Smart Chain.

Note: This is just a preliminary assessment; investors should conduct thorough research before making any investment decisions in any project.

Conclusion:

Oracles are an essential part of the Blockchain ecosystem, playing a crucial role in connecting Blockchain to the real world. With the development of decentralized Oracle projects, we can expect a future where dApps can access reliable and secure data, opening up many new applications for Blockchain technology.

Source: BLOGTIENAO