9 Interesting Facts About Blockchain Oracle

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Blockchain oracles refer to entities that connect blockchains to external systems, which allow the execution of smart contracts based upon inputs and outputs from the real world. Oracles provide a way for the decentralised Web 3.0 ecosystem to access existing data sources, legacy systems, and advanced computations.

Let us try and understand using an example. Imagine that you and your friend bet 10$ each on two F1 racing teams. You now have $20 held in escrow by a smart contract. When the race ends, either of you wins but how would the Smart contract know who won? An oracle mechanism is required to fetch accurate race outcomes off-chain and deliver it to the blockchain in a secure and reliable manner.
cloud service?

Cloud services are software or platforms hosted by third-party providers available for users through the internet. These aid in the flow of user data from clients(like a user’s laptop), through the internet, to the provider’s systems, and back. It is designed to allow anyone to set up a virtual office anywhere, and access your data anytime.

What does it mean?

The Oracle Blockchain Cloud Service is a company-level and pre-assembled platform to run smart contracts and maintain a tamper-proof distributed ledger. This service can be used to easily build secure and verifiable applications that share trusted data with suppliers which cannot be modified.

Is Oracle creating a business network on its blockchain?

No, Oracle provides a blockchain cloud platform for users to create business networks. Customers can enable distributed ledger technology (DLT) and other blockchain features to build applications and business networks.

Performance History

Reputation is a key factor in blockchain oracle systems. It gives users and developers the ability to choose between oracles based on parameters they desire. Oracles sign and deliver their data onto an immutable public blockchain ledger. Thus their historical performance history can be analysed and presented to users through interactive dashboards like market.link and reputation.link. This further helps its reputation.

Reputation frameworks grant transparency into the accuracy and reliability of each oracle network and node operator. This helps users make informed decisions about the oracles they want to service their smart contracts. Oracle service providers can also use their off-chain business reputation to provide additional guarantees of their reliability.

Classification of Blockchain Oracle

1. Software oracles

Software oracles interact with online sources of information and transmit it to the blockchain. The source of information could be any online databases, servers, websites – basically, any data source on the Web.

Being connected to the internet allows them to supply information to smart contracts and to transmit that information in real-time. This makes software oracles one of the most common types of blockchain oracles.

Information typically provided by software oracles can include exchange rates, real-time flight information, or digital asset prices.

2. Hardware oracles

Some smart contracts need to interact with the real world. Hardware oracles have to get information from the physical world and make it available to smart contracts. This could be done using electronic sensors, barcode scanners, and other information reading devices.

A hardware oracle basically “translates” real-world events into digital values that can be understood by smart contracts.

Imagine a sensor that checks if a truck transporting goods has arrived at a loading bay. If the answer is yes, the sensor will relay the information to a smart contract. It will then execute decisions based on it.

3. Inbound and outbound oracles

Inbound oracles transmit information from external sources to smart contracts. On the contrary, outbound oracles send information from smart contracts to the external world.

For example, an inbound oracle would tell a smart contract the temperature measured by a sensor. However, an example of the outbound oracle could be a smart lock. If funds are deposited to an address, the smart contract sends the information through an outbound oracle to unlock the smart lock.

4. Centralised oracles

Centralised oracles are controlled by a single entity and it is the sole provider of information for the smart contract. But having only one source of information can be risky as the effectiveness of the contract depends on the entity controlling the oracle. Also, any malicious interference from a bad actor will have a direct impact on the smart contract.

The main problem with centralised oracles is that they allow the existence of a single point of failure. This makes the contracts less resilient to vulnerabilities and attacks.

5. Decentralised Oracles

A centralised oracle ends up defeating the entire purpose of a decentralised blockchain application by creating a single point of failure. Additionally, a smart contract outcome based on faulty data cannot be reversed, meaning user funds can be permanently lost. Therefore, centralised oracles are a non-starter for smart contract applications.

Truly overcoming the oracle problem demands decentralised oracles to prevent data manipulation, inaccuracy, and downtime. A Decentralised Oracle Network (DON) combines multiple independent oracle node operators and multiple reliable data sources to establish end-to-end decentralisation.

6. Contract-specific oracles

A contract-specific oracle is one that is designed to be used by a single smart contract. This means that if one wants to deploy several smart contracts, a proportionate number of contract-specific oracles have to be developed.

This type of oracle is considered very time-consuming and expensive to maintain. Companies that want to extract data from a variety of sources may find this approach very impractical. On the other hand, since contract-specific oracles can be designed from scratch to serve a specific use case, developers have high flexibility to tailor them to specific requirements.

7. Human oracles

Sometimes even humans with specialised knowledge in a particular field can also serve as oracles. They can research and verify the authenticity of the information from various sources and translate that information to smart contracts. Since human oracles can verify their identity using cryptography, the possibility of fraud is relatively low.

Blockchain Oracle Problem

The blockchain oracle problem is because of a fundamental limitation of smart contracts. It is that they cannot inherently interact with data and systems existing outside their native blockchain environment. Thus any resource external to the blockchain is considered “off-chain,” while data already stored on the blockchain is considered on-chain.

This kind of isolation is what allows blockchains to be secure. It is also the foundation of properties like strong consensus, prevention of double spending, and mitigation of network downtime. Securely interoperating with off-chain systems from a blockchain requires an “oracle” to bridge the two environments.


Solving the oracle problem is really important since most smart contract use cases like DeFi require knowledge of real-world data and events happening off-chain. Thus, oracles expand the types of digital agreements that blockchains can support. This is done by offering a universal gateway to off-chain resources while still upholding the valuable security properties of blockchains.

Major industries benefit from combining oracles and smart contracts including asset prices for finance, weather information for insurance, randomness for gaming, IoT sensors for supply chain, ID verification for government, and much more.

Since the data delivered by oracles to blockchains determines the outcomes of smart contracts. This makes it critically important that the oracle mechanism is correct if the agreement is to execute exactly as expected.

Types of Blockchain Oracles

Given the extensive range of off-chain resources, blockchain oracles come in numerous shapes and sizes. Hybrid smart contracts require various types of external data and computation. They also demand various mechanisms for delivery and different levels of security. Generally, each type of oracle involves some combination of fetching, validating, computing upon, and delivering data to a destination.

1. Input Oracles

It is the most popular oracle and it fetches data from the real-world (off-chain) and delivers it onto a blockchain network for smart contract consumption. These types of oracles are used to power Chainlink Price Feeds, providing DeFi smart contracts with on-chain access to financial market data.

2. Output Oracles

These are the opposite of input oracles and allow smart contracts to send commands to off-chain systems that trigger them to execute certain actions. This can include informing a banking network to make a payment, telling a storage provider to store the supplied data, or pinging an IoT system to unlock a car door once the on-chain rental payment is made.

3. Cross-Chain Oracles

These types of oracles can read and write information between different blockchains. Cross-chain oracles enable interoperability for moving both data and assets between blockchains. For example, using data on one blockchain to trigger an action on bridging assets cross-chain so they can be used outside the native blockchain they were issued on.

4. Compute-Enabled Oracles

This is a new type of oracle becoming more widely used by smart contract applications. It is because it uses secure off-chain computation to provide decentralised services that are impractical to do on-chain due to technical, legal, or financial constraints. This can include using Keepers to automate the running of smart contracts when predefined events take place. It also includes computing zero-knowledge proofs to generate data privacy, or running a verifiable randomness function to provide a tamper-proof and provably fair source of randomness to smart contracts.

Blockchain Oracle Use Cases

Smart contract developers use oracles to build more advanced decentralised applications (or dApps) across a wider range of blockchain use cases. While there are a potentially infinite number of possibilities, below are the use cases with the most current adoption.

1. Decentralised Finance (DeFi)

A large portion of the DeFi ecosystem requires oracles to access financial data about assets and markets. For example, decentralised money markets employ price oracles to determine a users’ borrowing capacity and check if their positions are undercollateralized and subject to liquidation.

2. Dynamic NFTs and Gaming

NFTs—Non-Fungible Tokens can change in appearance, value, or distribution based on external events like the time of day or the weather using oracles.On-chain gaming applications also use verifiable randomness to create more engaging and unpredictable gameplay experiences. For example the appearance of random loot boxes or randomised matchmaking during a tournament.

3. Insurance

Insurance smart contracts use input oracles to verify the occurrence of insurable events during claims processing, opening up access to physical sensors, web APIs, satellite imagery, and legal data. Output oracles can also provide insurance smart contracts with a way to make payouts on claims using other blockchains or traditional payment networks.

4. Business

Cross-chain oracles offer businesses a secure blockchain middleware which allows them to connect their backend systems to any blockchain network. The institutions are able to quickly join blockchains in high demand by their counterparties. They can also swiftly create support for smart contract services wanted by their users. This is done without having to spend time and development resources integrating with each individual blockchain.

5. Sustainability

Hybrid smart contracts are advancing environmental sustainability by creating better incentives to partake in green practices through advanced verification techniques around the true impact of green initiatives. Oracles are a critical tool to supplying smart contracts with environmental data from sensor readings, satellite imagery, and advanced ML computation. This then allows smart contracts to dispense rewards to people practising reforestation or engaging in conscious consumption. Oracles are also supporting many new forms of carbon credits to offset the impacts of climate change.

Advantages of Oracle Blockchain Cloud Service

1. Transparency: Any addition in the database will be replicated across all participants.

2. Security: Only authorised individuals will be allowed to access the data that is otherwise encrypted.

3. Immutability: Blockchain databases can not be modified or deleted.

4. Oracle Managed service: This service offers zero-downtime managed patching and updates. It also includes embedded ledgers and configuration backups.

5. Object store integration: Automatically replicates backed-up data among Oracle Cloud Infrastructure.

6. Integration in Oracle Cloud Infrastructure: Uses Oracle Cloud Infrastructure to incorporate infrastructure dependencies (managed containers, virtual machines, identity management, block and object storage).

7. Adds REST Proxy: Supports a lot of Fabric APIs using REST (a set of architectural constraints) for simpler transaction integration. Which helps simplify integration and simulates application for any change in the transaction flow.

8. Faster Integration: This service aids in plug-and-play enterprise adapters to integrate Oracle Saas, Paas, and other applications or business processes to streamline data exchange.

9. Management and Operations Console: Provides a better web user interface to help automate a lot of administration tasks like adding organisations to a network or ledger browsing, etc.

10. Replaces Ledger database world state store with Oracle Berkeley Database: Provides SQL-based rich query support and validates query results at commit time to maintain ledger integrity.

11. Integrated Rich History Database: Allows private data collection to an autonomous database on blockchain translation history. It also supports standard and blockchain tables for storing rich history.

12. Highly Available Architecture and Resilient Infrastructure: Designed as a secure, and scalable platform for autonomous recovery of network components for all business-critical enterprise applications.

Applications of Oracle Blockchain Cloud Service

Blockchain technology can be used in below industries :

1. Finance and international trade

2. Capital markets and securities settlements

3. Tracking counterfeit drugs

4. Foreign transactions

5. Supply chain management

6. Database Management

7. Clinical trials in the healthcare sector

8. Finance commodities

9. Trading & investments

10. Database maintenance

11. Regulatory certification

12. Healthcare and Genomics


In this article, we learnt about blockchain oracles from scratch. We discussed what it is, what the oracle problem is and what might constitute a viable solution to it. The article also follows up on decentralised oracles and the types of blockchain oracles available right now. In the end, we also learn about its various use cases.

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