What is Oracles?
Oracles are third-party services that provide smart contracts with external information. They serve as bridges between blockchains and the outside world, enabling smart contracts to interact with real-world data, such as prices, weather conditions, sports scores, and more.
Here's how oracles typically work:
Data Source: Oracles retrieve data from off-chain sources, such as APIs, websites, or IoT devices. These sources provide the real-world data that smart contracts need.
Data Transmission: Oracles transmit the data to the blockchain in a secure and trustless manner. This ensures that the data is reliable and tamper-proof.
Smart Contract Interaction: Smart contracts use the data provided by oracles to trigger actions or make decisions. For example, a smart contract could use an oracle to determine the outcome of a sports event and distribute winnings accordingly in a decentralized betting application.
Feedback Mechanism: Some oracles use a feedback mechanism to verify the accuracy of the data they provide. This helps prevent malicious actors from manipulating the data.
Oracles play a crucial role in enabling blockchain applications to access and utilize real-world data, expanding the use cases of smart contracts beyond the blockchain itself.