Why do we need blockchain oracles?

2022-10-12 03:50

Many blockchain applications require interactions with external data, both real-world and off-chain. This data can represent anything from scores of real-life sports competitions to weather conditions. 

But blockchains cannot access external data. They are intentionally designed as closed systems to enable secure, reliable, and tamper-proof transactions. This is where a blockchain oracle comes into play. It is an application that connects extrinsic data with blockchain networks. 

Types of oracles

First of all, oracles can work in two directions. Inbound (or input) oracles pull external data and feed them into smart contracts. Outbound (or output) oracles work in the opposite direction; they push events that take place on the blockchain to the outside world. 

Oracles can also be classified as hardware and software oracles. Hardware oracles transfer data from the physical world. They can be applied, for example, in supply chain operations, to read data from RFID or NFC tags. Software oracles send off-chain, but still digital, data to smart contracts. In other words, we can use oracles to pull data from websites, servers, or online databases. An application area is, for instance, using prices of financial assets to place buy or send orders in crypto exchanges. 

The oracle problem

We can also group oracles as centralized and decentralized. A centralized oracle is one that is controlled by one single entity. Since this type of oracle depends on only one source, the operations can be very fast. However, centralized oracles can suffer from a lack of accuracy and unavailability due to server breakdowns.

Such issues that can arise from using centralized oracles to bridge external resources with on-chain networks are commonly referred to as the blockchain’s oracle problem. 

That’s why, just like we need a decentralized web3 for a reliable, tamper-proof, and censorship-resistant internet, the oracles that we use to connect the outside world with the blockchain must also be decentralized. Otherwise, we risk relying on inaccurate and biased data.

A decentralized oracle uses multiple data sources from a distributed peer-to-peer network that builds consensus on the external data before sending it to the blockchain. So, they facilitate higher levels of security and accuracy. 

Decentralized blockchain oracle projects 

The most popular blockchain oracle solution is Chainlink. At the time of writing this article, the project’s native cryptocurrency, Link, is the number one oracle coin with a market cap of $3.7B per Coingecko data. Crypto companies can use Chainlink solutions to connect their smart contract data on any blockchain with price data, payment providers, medical data, verifiable randomness, automation functions, or external APIs. 

Other top blockchain oracle solutions by market cap include UMA, which enables oracle integrations for incentive-aligned liquidity mining and DAO fundraising, and API3, which provides beacons as data feeds to increase transparency and airnodes middleware to connect web APIs to any blockchain application. 

Use cases of blockchain oracles

Many industry pioneers collaborate with Chainlink. The partnerships are particularly common for connecting oracles to build dynamic NFTs. For instance, the play-to-earn card-collecting game Aavegotchi uses Chainlink’s oracle service to distribute rare attributes to existing NFT avatars. Another blockchain game, Polychain Monsters, uses the same technology to prove the randomness of its NFT pack distributions.

Another application area is decentralized weather coverage. The data-driven climate risk ecosystem Arbol uses blockchain oracles to pull data from rainfall datasets from the National Oceanic and Atmospheric Administration, for example.

The information markets platform Polymarket uses Uma’s oracles to push the answers of bets on-chain in order to accurately distribute rewards to the winning members.

Incorporating off-chain price feeds into DeFi protocols is another common use case of oracles. For example, Trader Joe integrates off-chain price data into its lending platform on Avalanche. As a result, issuing secure and scalable loans at accurate market prices becomes possible. 

The post Why do we need blockchain oracles? appeared first on NFT News Today.

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The monumental rise of decentralized blockchain oracles projects such as Chainlink (LINK) and Band Protocol (BAND), among others, points toward the rapidly growing blockchain oracles space. While the vast majority of Ethereum-based smart contract platforms are integrating blockchain oracles into their ecosystems, RSK stands out by being the first Bitcoin-based smart contract platform to bridgeRead MoreRead More.

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Chainlink Acquires Cornell University’s DECO Project, to Enhance the Privacy of Data on Oracles

Chainlink, the decentralized oracle provider, has acquired Cornell University-based project DECO meant to enhance the privacy of oracles used on blockchain networks. Oracle-based data plays a critical role in maintaining the blockchain network, and with growing cases of hacks and ransomware, strengthening the accuracy, security, and privacy of the Oracle systems would eventually enhance the […] The post Chainlink Acquires Cornell University's DECO Project, to Enhance the Privacy of Data on Oracles first appeared on BitcoinExchangeGuide.

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Elrond (ERD) to Integrate DIA Oracles to Access Secure Off-Chain and Cross-Chain Data

Sharded smart contracts execution platform Elrond (ERD) to integrate DIA oracles to access off-chain and cross-chain data. Elrond Taps DIA for Oracle Needs In an announcement made today, Elrond CEO, Beniamin Mincu stated that the scalable blockchain protocol’s DeFi products and smart contracts will use DIA oracles to fetch off-chain and cross-chain data.

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Harmony (ONE) Grant to Bootstrap Growth of Chainlink-Based DeFi Applications

Harmony—a fast, sharded, and scalable blockchain network for decentralized applications (dApps), is integrating Chainlink—an interoperable network of secure and tamper-proof oracles. Accompanying the incorporation is a dedication of part of the $7 million grant to bootstrap the growth of Chainlink-based DeFi and cross-border finance dApps built on Harmony as per an August 5 update.

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Binance Smart Chain Testnet Adds Real-World Data With Chainlink’s Oracle Network Integration

Binance Smart Chain (BSC) announced the successful completion of the integration of Chainlink’s decentralized oracle on Twitter this Tuesday. The combination of Chainlink brings about ease in the development of decentralized applications on the blockchain by providing a direct link to external data sources, which saves developers time in creating their oracles. BSC, who launched […]

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Waves integrates Band Protocol’s oracles to enable cross-chain use for Neutrino stablecoin

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China’s Blockchain Service Network Reportedly Integrating Ethereum

China’s state-sponsored Blockchain Service Network (BSN) is reportedly moving to start integrating with public blockchains like Ethereum and Nervos Network. News of these potential integrations come just a week after news broke about the BSN utilizing Chainlink Oracles to increase the speed and security of transactions taking place on-chain. This news seems to bode well […]

2020-6-30 05:00


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China’s Blockchain Service Network Integrates Chainlink’s (LINK) Data Oracles

According to a press release issued on June 23, 2020, China’s Blockchain Service Network (BSN) has joined forces with Chainlink (LINK) to tap the latter’s oracle service into its ecosystem. China’s BSN Embraces Chainlink China’s newly launched distributed ledger technology (DLT) initiative dubbed BSN has integrated Chainlink’s oracle functionality to its network.

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AVA Labs Integrates Chainlink’s Decentralized Oracles to Improve DeFi Dapps Development

AVA blockchain, becomes the latest platform to add Chainlink, a decentralized oracle system to its platform. The integration of Chainlink to the Dapp blockchain platform will reduce the development time and allow the creation of new products on the platform such as crypto derivatives, calculation of strike prices and triggering liquidations. In an official report […]

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Decentralized insurance protocol Nexus Mutual integrates Chainlink oracles

Nexus Mutual, a peer-to-peer risk sharing mutual built using smart contracts and blockchain technology, announced today it is now using Chainlink’s price reference data contracts for decentralized valuations of its multi-currency capital pool Chainlink’s decentralized oracle network will bring transparent and accurate on-chain valuations to Nexus Mutual’s multi-currency capital pool.

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Chainlink To Launch Its First Oracles Outside Ethereum on Polkadot Blockchain

Chainlink’s oracles have become a popular solution for Ethereum based DeFi’s as blockchain innovators seek to integrate their smart contracts with external data for more information. Polkadot, another blockchain built ecosystem, announced on Feb 25th through their blog post that they will also be leveraging the Chainlink tech.

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Neutro ICO

The Neutro Protocol solves the trilemma of scalability, security and decentralization, allows for anonymous transactions and eradicates the need for centralized oracles. Neutro users can create a decentralized version of almost any real-world market that exists now only in a centralized system that we all use currently.

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