What is the oracle in the blockchain

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How oracle blockchain works

The main problem of any blockchain is the lack of interaction with the real world. In simple terms, an oracle is an algorithm that collects information outside the blockchain network, interprets it in an understandable form, and transfers it to the network.

The basis of any smart contract is a set of certain conditions that require careful verification, but blockchains are limited by their block chain and are forced to use oracles to collect data and verify conditions. The protocols responsible for transactions and any transactions in the crypto world cannot change or stop until all the requirements that are written in them are brought to an end.

Therefore, developers have to prescribe a huge number of scenarios in order to foresee any unforeseen situation that a smart contract may encounter. The oracle can quickly provide the protocol with information that will allow it to complete its function simply by updating the execution criteria.

A smart contract should not only accept information from the oracle – it must understand it and recognize it as real. For this, developers use 3 steps.

  •  Information source – any resource from which the oracle can take the necessary data.
  • Search is a code by which the oracle selects only what it needs.
  • Oracle consensus is one or more algorithms that translate data into a format that the blockchain can understand.

Oracle blockchain types

The oracles have different purposes and functions, so they were created in several forms.

  •  The oracle in the form of software selects relevant information, which is subject to constant changes, in real time.
  • The hardware oracle is in contact with physical objects, such as radio frequency devices, to provide data from an offline world.
  • Incoming oracle is an algorithm embedded in the protocol of commercial transactions, which is programmed for specific circumstances. For example, he gives the go-ahead to a smart contract that it is necessary to activate the automatic purchase of digital currency, as it has grown to a certain position.
  • The outgoing oracle is also embedded in the protocol, but transmits information to the outside world that a certain condition has been met.
  • Oracle Consensus aims to predict the most likely course of events. Since one source of information may turn out to be unreliable, and it cannot process a single oracle anymore, several related algorithms are used that can cover more information platforms.

Why can’t blockchains do without oracles

Imagine blockchain as the road on which points A, B, C, D, E, H, etc. are located. For the correct and transparent performance of its functions, the blockchain must move sequentially from the first block to the last.

Any external information will violate this sequence, which will lead to possible commercial fraud since it will be possible to make changes to the data that the blockchain has already processed and saved. The consequences of introducing data from the outside in its pure form will compromise the blockchain and call into question the meaning of its existence.

The oracle searches for information, translates it into a format that the blockchain does not perceive as an outsider, and embeds the data at the necessary point on the road without breaking the sequence.

What the future holds for the oracle blockchain

Now all developers of cryptocurrency products are engaged in improving the connection of blockchains not only with the rest of the world, but also with other blockchains. The first oracles have already been created that allow parallel blockchains to interact with each other.

With enviable regularity, new smart contracts appear that expand the functions of the blockchain, and therefore they need new oracles to provide information. This area is developing rapidly, and the companies specializing in it receive significant investments.

The end result, at this stage, should be a single integrated platform that will connect blockchains with the rest of the world.

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