Image edited by me in Powerpoint
What is a Blockchain Oracle?
Functionalities and Importance of Blockchain Oracles
Between the centralized web and blockchains, there is an incompatibility problem generated by a difference in format.
Blockchains are closed ecosystems, with specific rules which follow a cause-effect chain, or in other words, each event takes place one after the other in sequential order.
However, the real world is not governed under a sequential order but is random and chaotic. For a blockchain, it is impossible to make sense of and use all this data. In fact, one of the problems with blockchains is their lack of flexibility.
The real world also does not keep track of events in the specific sequence they have taken place, which creates tracking and transparency problems. Still, certain data collection points can be generated, however, blockchains still need help to translate, validate and give context to the information.A blockchain oracle takes information from the external source, reinterprets it, and filters it in such a way that it can be understood by the blockchain platform under its same programming language, (Smart contracts).
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To understand a little better about the functionality of the Blockchain Oracle I invite you to read this Article and pay close attention to the example of Alice and Bob.
In conclusion, a blockchain oracle provides the necessary real information that smart contracts need in order to be executed.
Blockchain Oracle example: ChainLink
Chainlink Logo. Image taken from Chainlink site Source
It is a Network that was created as a provider to the entire DeFi sector; Oracle services of course. In fact, it is a whole network of collaborators and data providers converging on Chainlink.Throughout its development, it has established partnerships with various external data providers such as Coingeko, Binance, Healthtrends, Huobi, Kraken, as well as other minority partners who receive rewards in exchange for providing information to Chainlink. The platform then relays this data to the smart contracts of the blockchains that request its services.
The Chainlink network makes it possible to connect existing APIs to smart contract applications of any blockchain in any area such as decentralized finance (DeFi), insurance, video games, and others.
Through the use of secure oracles, Chainlink extends the functionality of blockchains by connecting smart contracts to real-world data, events, payments, and more in a highly tamper-resistant and reliable manner." Source
History and Properties of ChainLink
What's new for ChainLink?
Just this day a post came out on Chainlink's official Twitter account where they talk about a novelty called Hybrid Smart Contracts, which combine classic blockchain code together with the ability to operate codes outside the blockchain. Here is the detailed post and a link explaining this new technology.
Image and Article taken from Chainlink Twitter account. Source
It's always good to know about these platforms that sometimes go unnoticed or don't get the credit they deserve, but they definitely do a gigantic job.
If not for the Blockchain oracle platforms and networks, the cryptocurrency space, smart contracts, DeFi industry would not function the way it does today.
To them, we owe much of the world we know today, and the world that is to come, a world of decentralized finance that will increasingly require the use of Oracles.
It is for this reason that it is important to learn about their projects, as their tokens such as LINK look like excellent long-term investments. In fact, some think that its price can reach 40 or 75 USD in a few months ... only time will tell if this Oracle can illuminate our future.
Homework Task (Season 3/Week-7)
1- History and Description. Does it have any token or cryptocurrency associated? Explain.
2- Functionalities and real-life applications.
3- Pros and Cons.
4- Future developments and new projects
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