Oracle

Intermediate

An oracle may be defined in multiple different ways, according to the context. Within the blockchain context, an oracle is basically a data source that is used as a bridge between smart contracts and other external sources.

More specifically, an oracle is an agent that not only communicates with external data sources but also verifies and authenticates that the data being provided is accurate. Thus, oracles are responsible for providing vital and reliable information to smart contracts, which in turn perform certain tasks.

The importance of oracles relies on the fact that blockchain smart contracts are only able to access the data that is contained within their own digital network. Therefore, oracles are needed as a communication instrument that “translates” real world events (non-deterministic data) to digital values that be recognized by smart contracts (deterministic data).

Blockchain oracles may be classified according to their use case. The most common types are: