Oracle

Oracle in the context of blockchain technology and smart contracts refers to a service or entity that provides external data to smart contracts on the blockchain. Smart contracts are computer programs running on the blockchain, and oraculum acts as a provider of real-world information to these contracts. Oracle provides smart contracts with information that is not available on the blockchain, such as asset prices, election results, sports game results or weather data.
Bridge Between Blockchain and the Real World:
Oracle acts as a bridge between the decentralized world of blockchain and centralized data sources outside of it. This allows smart contracts to respond to changes in the real world.
Safeguards Against Manipulation:
To protect against potential manipulation, some oracle uses consensus and multiplexing mechanisms to confirm the accuracy of the data provided.
Applications:
Oracles are used in various areas such as finance, insurance, decentralized gaming, market forecasting, supply management, etc. For example, in DeFi (decentralized finance), oracle can provide current asset prices.
Decentralized Oracle:
To preserve decentralization principles, some projects are working on developing decentralized oracle. They use multiplexing to collect data from multiple sources while minimizing the risk of misinformation.
Usage Example:
Suppose a smart contract on the blockchain is designed to automatically trigger airline insurance in the event of a flight delay. Oracle provides the smart contract with information about the delay, and the smart contract makes the decision to trigger the insurance.
Security Against Price Manipulation:
In the context of decentralized finance (DeFi), oracle providing asset pricing can use various methods, such as multiplexing, to protect against price manipulation.
Challenges and Risks:
There are security and liability challenges for oracle, as misdelivery of information can affect the operation of smart contracts.
Community Reviews:
Decentralized projects often rely on community reviews to confirm the reliability of oracle’s performance, and to assess the security of the information provided.
In short, oracles play a key role in the blockchain ecosystem, enabling smart contracts to respond to changes in the outside world. However, this requires appropriate safeguards and mechanisms to ensure the accuracy and security of the data provided.