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What are Blockchain Oracles?

By Jaya Bijoor

Blockchain networks are typically closed systems - there’s no access to information outside of their networks. This is a challenge as smart contracts sometimes need real-world data to execute.

How is this solved?

Blockchain oracles.

A blockchain oracle is a bridge between a blockchain and outside data. It is a software program that enables a blockchain to access real-world data, such as stock prices, weather reports, or sports scores. Oracles act as intermediaries that provide trusted data to smart contracts that execute on a blockchain.

Oracles are critical in enabling smart contracts to execute based on real-world events.

Oracles also play a crucial role in DeFi applications, enabling access to market data for trading and risk management. Oracles can help determine the price of assets, track interest rates, and provide data on the performance of financial instruments.

Are there any downsides to using oracles?

Yes. One of the main concerns is the reliability and security of the data provided by oracles. Since oracles are centralized points of failure, they are vulnerable to attacks that can manipulate the data they provide. As a result, it is essential to use verified oracles to ensure the accuracy and security of the data used in smart contracts.

Nevertheless, blockchain oracles are essential for bridging the gap between blockchain networks and the outside world.

And while there are challenges associated with using oracles, the benefits they offer regarding data access and automation are well worth the effort to ensure their security and reliability.

Learn more here and here.



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