I often hear people talking about ‘Oracle’ in Chinese (预言机), but it can be challenging to understand its meaning. Is it a mechanism for predicting something? It seemed quite perplexing.
However, upon conducting online research and delving into the details, I discovered that Oracle is actually a mechanism that connects offline data to the blockchain.
As we know, the blockchain doesn’t inherently connect with the offline world. For instance, if we want to know the price of Apple stock in the stock exchange, the blockchain lacks data related to Apple stock prices. So, how do we bring this external data into the blockchain and ensure its alignment with real-world situations?
Enter the ‘Oracle.’ It functions like an API, bringing offline data onto the blockchain and vice versa. This allows people to use the data for various activities, ultimately recording offline activities on-chain. Returning to the stock example, when the Oracle fetches real-time Apple stock prices, it feeds them to the smart contract. The smart contract, constantly operating and receiving data from the Oracle, can execute certain actions or transactions based on pre-defined rules when the stock price reaches a specific range.
Oracle networks can be centralized or decentralized. Here, I’ll focus on decentralized Oracle networks, such as Chainlink.
In a decentralized Oracle network, numerous nodes collaborate to collect offline data, ensuring its accuracy. Each node is required to pledge a certain amount of tokens. If a node creates a fraudulent event, the pledged tokens will not be returned.
This decentralized Oracle network, exemplified by Chainlink, provides a robust solution for bringing external data reliably onto the blockchain, enhancing the capabilities of smart contracts.
web3 — Jan 24, 2024
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