Oracles: where blockchains meet the real world
“We teach what we need to learn, and write what we need to know”
Remember The Oracle on popular movie The Matrix? That sweet lady which could see the future and told Neo that sadly he was not The One?
She could see things that people inside The Matrix could not see, she had contact with the outer part of the Matrix, and that helped her doing predictions about the future. She was the person gifted to receive wisdomfrom trusted entities (some sort of God) and pass the information to The Matrix, information that was considered true for its inhabitants.
That’s exactly what oracles are looking to be in blockchain technologies. In a technology that is cataloged as trustless, real world information (such as stock prices, votes, weather, etc) need a trusted data source with reliable information to be used within the blockchain.
An oracle is to be used on a smart contract, a digital contract that triggers a specific action on the blockchain when some criteria are met. In this case, an oracle, a smart contract itself, decentralized and reliable, can check real world information to trigger some action inside the blockchain. e.g. when certain stock, let’s say a bank betting against bitcoin (sounds familiar?), looses its value by 50% or more, an oracle can detect this and automatically buy bitcoins using some fiat currency.
Some examples of oracles already being used are the following:
- ChainLink: A decentralized middleware currently used in Bitcoin and Ethereum blockchains, partnered with SWIFT to enable bank transactions using blockchains. For more info, nice review by Crush Crypto: https://www.youtube.com/watch?v=q0ad_GGvo5o
- Modum: modum.io provides data integrity for supply chains using blockchain. They rely on physical oracles, such as sensor networks’ data to improve supply chains.
- Augur: augur.net, a blockchain used for prediction markets uses a consensus-based oracle system, where in order to understand if the predicted event indeed happened, the oracles need to agree.
Hope this first post can be useful for some to understand the basics of blockchains and how they will impact on our societies. Stay tuned for more posts on blockchains, cryptos and politics.