Ever since blockchain has been in vogue, you must have started to hear new terminologies every day. Most of the new terms are associated with all the new entries that are finding their way to become a fast-growing cryptocurrency. However, there are a few words, which may up bring your knowledge in blockchain to another level. One of such terms is the Blockchain Oracle.
Now that everyone is aware of blockchain and some have even started to explore their career in blockchain technology. If you’re one of the enthusiasts, it is always great to walk along the time and know everything that knocking to change the things you do. Today, we’re going to unveil one such terms and would explain on what is Blockchain Oracle.
What is Blockchain Oracle?
A Blockchain Oracle works as an agent that interacts with the outer world (beyond blockchain) to gather information and verify the real world undertaking or occurrences with an intention of submit it to the blockchain, where the submitted information is used by Smart Contracts.
In simple words, Blockchain Oracle acts as an emissary that is able to step out of the blockchain and gather information and then bring it back to Smart Contracts to fuel its processing.
What is Smart Contracts?
Smart Contracts are sophisticated self-executing programs that exist on blockchain. These Smart Contracts contain different values, which can only be unlocked when all the predefined conditions are met and fulfilled. The Smart Contracts require a specific value to reach before they can trigger their intent algorithm and change its state programmatically. When this whole activity is processed, an event is triggered on blockchain.
However, the information required to change values in Smart Contracts may sometimes be needed from beyond the blockchain sources. Now that Smart Contracts are not allowed to interact with off-chain resources, it creates obstacles in getting a process done. This is when the Blockchain Oracle comes to rescue.
What are the types of Blockchain Oracle?
When Smart Contract needs a messenger to fetch information to execute its tasks, it very much clears on what is Blockchain Oracle. Now let’s take a look at the types of Blockchain Oracle:
- Hardware Oracles: Hardware Oracles are used when special types of Smart Contacts require certain piece of information right from the outer world. These contracts are designed to only execute when the certain condition met. The hardware oracle is like a security check gate that confirms a product entry when it passes through it and then sends the confirmation to Smart Contract.
- Software Oracle: Software Oracle uses all the information available on internet and then sends it to smart contracts. For example, weather conditions, asset price, share market conditions etc.
- Consensus-Based Oracle: Consensus-based oracle is used where you cannot rely only on one specific source of information to process the smart contracts. This way, the information is collected from various sources and then processed to simplify to one. This is widely used in prediction markets, where the information is collected from various sources before reaching to a conclusion.
- Inbound Oracle: Inbound Oracles perform as the messenger to smart contracts. They provide the contracts with the data collected from the outer world. Like a transaction is done in Bitcoins to a trader when a parcel is received.
- Outbound Oracle: Outbound Oracles make smart contracts to transfer data to outer world upon meeting a condition. For example, in hotels, the room gets unlocked as soon as the guest pays.
Now that you know what is Blockchain Oracle, it is the time to get your head around it and make the most of the technology. This tech agent is the reason smart contracts can establish a communication beyond the blockchain to gather information. There’s no ambiguity that without Blockchain Oracle, the smart contracts would cripple. If you wish to share your knowledge over smart contracts and Blockchain Oracle, do let us know in the comments below.