Understanding Oracles and Their Implementation in Smart Contract

Oracle Smart Contracts

Ethereum is the most popular blockchain for creating Dapp. It provides flexibility to the users/developers to write and deploy their contracts over the blockchain and integrate with Dapps. A smart contract provides a lot of functionality that we can use. However, there is some limit on these contracts.

Smart contracts and blockchain cannot fetch data from external networks. It means they can only do that from their network. In any other traditional languages, we can create any API and later call these APIs to use anywhere we want. But, in the case of blockchain, we cannot do that. We need to use any service/adapter through which we can get the data from external data. 

Here, we need Oracle smart contract to get the data from external sources and use it inside Smart Contracts.

Oracle Contracts

Oracle is a smart contract service through which we can get the data from an external contract. In this, we create a smart contract that will provide the data to others. Here, we need to set up a service at the backend or any other platform. It updates findings on this smart contract. One of the most popular Oracle platforms is Chainlink. In Chainlink, users can set up their node and run the adapter that will do the backend. Now you can publish this link on the chain-link market and get rewards if anyone uses your service. 

Oracle charges some fees for providing service. But, with proper knowledge, you can set up your oracle services.

Types of Oracle Smart Contracts

Software Oracles 

These oracle deals with data that is available online like temperature, flight price, products price, etc.

Hardware Oracles

These are the oracle where we can only get the data through any hardware setup. For reference, we have set up a server that is only accessible to a particular company/person and needs to update that price to the smart contract.

Inbound Oracle

Get the data from an external network like APIs.

Outbound Oracles

Oracles to send the data to the external network similar to calling post API.

Consensus Oracles

These oracles get the information from human consensus and prediction markets like Gnosis and Augur.

Conclusion 

By following this blog, you will get an overview of what an oracle is, why we need to use it, and how it works. You can either use an existing oracle service or create yours based on the requirements.