Cryptocurrencies are a fast-growing field that suddenly attracted people from a variety of professions: finance, mathematics, economics, theoretical and applied computer science, cryptography, etc. Each one of those have brought in their vocabulary and buzzwords with them. With so many buzzwords being thrown around daily it is sometimes very hard even for professionals to understand what is going on. Today we’ll demystify one more buzzword: oracle.
So what is a blockchain oracle, what is it useful for, and what types of oracles exist?
Table Of ContentsBlockchain Oracle Definition Usage of Oracles in Smart Contracts Types of Oracles MakerDAO Price Oracle Augur oracles for decentralized prediction markets Chainlink decentralized oracles Blockchain Oracle Definition
The term oracle in the context of blockchains has first been popularized by the Ethereum crowd when they started talking about using real-world data inside smart contracts. When you analyze a smart contract system you think about it as of a cryptographic protocol, and thus professionals tend to rely on cryptography vocabulary.
In cryptography, an oracle, or an oracle machine, is a term used to describe an abstract black box service that simply performs its job, and you don’t think about how it works. For example, when you transfer some $ETH to your Binance deposit address you don’t really care where the gas price is coming from. From your point of view, you could say that the gas price is being provided to you by an oracle.Usage of Oracles in Smart Contracts
In the current meaning within the cryptocurrency industry, an oracle is a service that supplies some real world data onto the blockchain so that smart contracts can query this information. As you may already know, the whole point of a blockchain is that it knows everything about itself: how many blocks were mined, who mined them, all balances, all transfers, all transactions, when they happened and in wha...