Educational Post: What is a blockchain oracle? Blockchain o | APEX WHALE LIBRARY

Educational Post:

What is a blockchain oracle?

Blockchain oracles are services that function as bridges between blockchains and the real world, enabling smart contracts to access data sources outside their native networks. In other words, they act as a link between on-chain applications and off-chain data.

As such, off-chain events can be conveyed into on-chain ones recognized by smart contracts. This information can be anything, from token or stock prices to the results of a football game, or a weather forecast.

Blockchain oracles can also verify if data is accurate, though they are not the data source itself. Instead, they are akin to an additional layer that collects and authenticates information and transmits it to the correct destination.

Blockchain oracles also allow people to use blockchains in contractual agreements. For example, you and your friend could bet on a football game in this way: firstly, both of you agree on terms and lock your funds in a smart contract. Secondly, the blockchain oracle will inform the smart contract of the game's result. Finally, after the game ends, the smart contract will release the funds to the winner of the bet.

There are different types of blockchain oracles, and one oracle can fall into multiple categories: software, centralized, decentralized, inbound, and outbound oracles. Essentially, how a blockchain oracle operates depends on the purpose for which it was built.

Blockchains would have less potential and fewer possibilities for mass adoption without oracles, as their information would be limited to their internal data. While blockchain oracles don't solve the problem of data availability, they can make available off-chain data on-chain using external sources.