As far back as the ancient days in the Greek world, people sought to get information, answers and knowledge to problems which are beyond their reasoning by consulting the oracles.
The oracle here serves as a third party who is believed by the Greeks to be knowledgeable and be a carrier of information and answers to whatsoever problems they might be encountering in life. So it is in the BLOCKCHAIN space.
Information is needed from the real world into the blockchain space like bitcoin and Ethereum in order for smart contracts to be able to carry out some specific tasks themselves.
Blockchain oracle represents those layers that verifies, and authenticates external data sources and then relays that information. These data could be price information, completion of a payment, or the temperature measured by a sensor.
With that being said, let's give a detailed explanation as to what Blockchain oracles is.
What is BLOCKCHAIN ORACLE?
Oracles are simply put, the middlemen and information carrier, which collects data from the outside world and relates such data into the blockchain space. This will help the smart contracts perform the required task needed to be done when the original terms of contract have been fulfilled. E.g temperature, transaction completion, price change, etc.
Without the existence of an oracle, smart contracts cannot access data or information outside the blockchain space. Just as the oracle relates information gotten from the outside world into the blockchain space, so does it carry data and information from the blockchain environment, to the outside world.
The various types of Blockchain Oracle
These are the types of oracle which exist:
Software and hardware oracle
Inbound and outbound oracle
Centralized and decentralized oracle
Contract specific oracles
Human oracles
Software and Hardware Oracle
This kind of oracle is related to the source where the information is gotten.
Software oracle is simply the use of the web and internet, to seek information and data. This information is gotten online. It is the commonest amongst all other oracles.
Hardware Oracle are data and information gotten by smart contracts from the real world, and are done through the help of the hardware Oracle. These are simply using things like barcode, scanner, sensor, to relate information from the physical world to the smart contracts.
Inbound and outbound Oracle
Such kinds of oracles are based on the Direction of information.
Inbound oracle: This is simply the transmission of information from external sources into the smart contracts so as to be able to perform tasks assigned to it.
Outbound oracle: This is the opposite of an inbound oracle. This simply relates information gotten from the blockchain environment to the outside world.
Centralized and decentralized Oracle
This sort of oracle is solely based on trust.
Centralized oracle just like the name implies, talks about information being provided and gotten from a single channel. Studies have shown that the idea of relying on a single means of getting information has a higher percentage of risk attached. This source is prone to attacks and failures which could result in the malfunctioning of the smart contracts.
Decentralized Oracle is the sourcing and obtaining of Information by the smart contracts from a large number of channels. This is a much more trusted and reliable means of relaying information to the blockchain space as there are a lot of options from which the smart contracts can verify information gotten thereby reducing the chances of wrong data.
Contract specific Oracles
This kind of oracle is designed to help carry out some special tasks on a single smart contract. If there's a plan to create several smart contracts, the same number of contract specific oracles will have to be developed by the user(s).
Human Oracles
This kind of oracle is a combination of humans who are experts and have a certain level of high knowledge in a required field. They can help in researching and authenticating information gotten from different sources and in turn, relate such information to the smart contracts.
The human oracle Identity is verified through the use of Cryptography thereby reducing the risk of fake identity.
Problems associated with Blockchain Oracle
Just as Oracle has proven to be useful and very much needed in the smooth running of the blockchain space, there are problems associated with it which could turn out to become harmful to the blockchain environment.
We remember that the Oracle is only an intermediary and a translator of information. Therefore, the oracle is not covered with the security which the smart contracts enjoys in the blockchain space. As a result of this, if the oracle is tampered with or manipulated, the smart contracts attached to such oracles suffer a negative impact. This is what we call the oracle problem.
This problem can also be as a result of a forced entry into the oracle by an unauthorised person who could end up falsifying and manipulating data and information.
Additionally, oracles operate on non-deterministic data, hence, its reliability needs to be trusted, removing trustless peer-to-peer communication. if the data in which a blockchain oracle is working on gets altered, it will feed the smart contracts with data that are untrue hence causing a negative effect.
Solutions to the Blockchain Oracle problem
The solution to the problems associated with blockchain oracles should be – a system of decentralized oracles or networks that can be trusted to reproduce the consensus mechanism of the blockchain.
These networks will be responsible for retrieving data from various sources, so that it can deliver a validated, single data point to the smart contract to hasten the speed of its execution, in turn, this will limit any single failure point.
Chainlink as a startup, has already incorporated multiple layers of security beyond decentralization so that users can trust the oracle network. Chainlink can be considered as a flexible framework that effectively addresses oracle malfunction or failures.
With chainlinks blockchain oracle solution, users are able to build and connect to customized Oracle networks independently of other Oracle networks.
When there's no decentralization, the originality of data cannot be verified to address the Oracle problem hence, a trusted and reliable system is needed for the smart contract to thrive.
Concluding thoughts
The blockchain oracle has proven to be a vital and very important game changer in this space which allows information and data to flow easily and accurately from the smart contracts to the real world and vice versa. There's a suggestion that the decentralized Oracle has the needed tools and capability to develop a safe means which will eradicate a lot of risks associated with the blockchain world.
For the Blockchain space to continue to thrive without limitations, the blockchain oracle remains one of the major factors to enjoy the full potential of this space.
