Oracles are an important component of the blockchain ecosystem, especially when it comes to smart contacts.
Oracles provide the blockchain with an accurate source of information – and they can be used in countless different industries and scenarios. Furthermore, some oracles are not only able to transfer information to smart contracts, but they can also send it back to external sources.
Different Types of Oracles
There are several different types of oracles when it comes to blockchain, including:
- Software oracles – These oracles process data from the Internet and put the relevant extracted data into a smart contract.
- Hardware oracles – These oracles are used when interaction with physical sources, such as sensors, is required.
- Human oracles – These oracles are useful in applications when data or information from an external source must be checked by a human.
- Centralized oracles – These oracles take information from one provider (or group of providers) controlled by one entity and pass it on to another.
- Decentralized oracles – These oracles are used for smart contracts which request information from several sources at once in order to confirm the reliability and accuracy of the data provided.
- Inbound oracles – These oracles receive information from the Internet and transmit it to the blockchain.
- Outbound oracles – These oracles pass information from the blockchain to the outside world, and they have various applications, such as checking the status of a payment.
Why Are Oracles So Important For Smart Contracts?
Oracles can serve as a reliable tool and mechanism to simplify communication between smart contracts and the outside world. This is very important for making smart contracts more attractive to key market players and to speed up their adaptation across sectors.
Without these oracles, smart contracts would be forced to rely on the information that is just already within the network, thereby significantly limiting their capabilities and real-life applications.