Blockchain oracle
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A blockchain oracle is a third-party service for smart contracts. The oracle provides information from the world encapsulates multiple sources, so that decentralized knowledge is obtained. Oracles provide trusted information based on the outside-world sources to the on-blockchain smart contracts. An oracle typically encapsulates the real-world complexity outside of the blockchain, since the on-chain critical errors are hard to fix.[1] For example, in a contract to automatically purchase bitcoins at a predetermined price, the fulfillment condition is based on the current exchange rate for the bitcoin; off-chain oracle constantly monitor the price to provide the triggering condition to the contract.[1]
Decentralized oracle networks (DONs) enable the creation of hybrid smart contracts, where on-chain code and off-chain infrastructure are combined to support advanced decentralized applications (dApps) that react to real-world events and interoperate with traditional systems.[2]
Examples
Oracles are also used in DEFI, gambling, Metaverse gaming, NFT-s, and Smart Contract insurance.[6]
Concerns
If an oracle relies on a single source of truth (centralized), that can lead to issues: the data source can be hacked in a man-in-the-middle attack, or altered by its owner, in order to sway smart contracts. Decentralized oracles (consensus oracles) increase the reliability of the information provided to smart contracts by querying multiple data sources, thus distributing trust between participants. However, this does not achieve trustlessness, since oracles are not part of the main blockchain consensus, and thus not part of the security mechanisms of public blockchains.[7]
References
- ^ a b Kustov & Selanteva 2022, p. 86.
- ^ "A systematic literature review of blockchain-based applications: Current status, classification and open issues". ScienceDirect. March 2019.
- ^ Peterson, Jack (30 November 2020). "Augur: a decentralized oracle and prediction market platform". arXiv:1501.01042 [cs.CR].
- ^ Beniiche, Abdeljalil (2020). "A Study of Blockchain Oracles". arXiv:2004.07140 [cs.CR].
- ^ "Blockchain Oracle: Types, Uses and How it Works". GeeksforGeeks. 27 September 2023. Retrieved 5 April 2024.
- ^ "What is an Oracle in Blockchain?". LearnCrypto. Retrieved 5 April 2024.
- ^ "A systematic literature review of blockchain-based applications: Current status, classification and open issues". ScienceDirect. March 2019. Retrieved 4 April 2024.
Sources
- Kustov, Vladimir Nikolaevich; Selanteva, Ekaterina Sergeevna (2022). "Mutual Recognition Mechanism Based on DVCS Oracle in the Blockchain Platform". Utilizing Blockchain Technologies in Manufacturing and Logistics Management. Advances in Business Information Systems and Analytics. IGI Global. ISBN 978-1-7998-8699-0. Retrieved 2024-04-16.
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