What is a Blockchain Oracle and How to Become One?
Smart Contracts are getting popular and, there is a hoard to build ever more sophisticated contracts. What is a Smart Contract? It is essentially a contract converted to a piece of code on the Blockchain. From weather risk products to Euro swap contracts, you name it and, there probably is a company enabling such contract. Why are Smart Contracts getting popular? They offer efficiency that is just not possible using a traditional contract. Under a Smart Contract, the exchange of payments happens in minutes, maybe seconds, while under a Traditional contract, it can take days for the payment to settle. However, there is a well-known issue with Smart Contracts, it’s called the Oracle Problem. In simple terms, Smart Contract running on the Blockchain (on-chain) has no idea of the real world, and it needs off-chain (not on the Blockchain) systems or Oracles to provide it with the external data from the real world. Why can’t Blockchain get the data directly from an external data provider? The blockchain design principles make it ill-suited to get subjective data or verify the quality of the external data. It is difficult and computationally heavy for the Blockchain to get a piece of simple information such as What is the price of Bitcoin?
What is a Blockchain Oracle?
So what exactly is a Blockchain Oracle? Well, it is a piece of software and hardware solution off-chain (also known as a Node) that feeds smart contracts the data it needs from the real world. How does it get this data? It gets the data from external data sources. One such example of reliable data from an external source is Forex and CFD data from TraderMade API. Now you may ask, how can the Smart Contract users be sure the data from the Oracles will be reliable and accurate? They Cannot, hence, companies such as Chainlink have built the infrastructure around the Smart Contracts that ensure data is reliable and accurate. How do companies do this? First, they use a cluster of decentralised Oracles networks to get data rather than relying on one node or oracle for data needs. Second, they use a rank system to highlight good and poor data providers that ensure users can make an informed decision by looking at past performance history.
How to become a Blockchain Oracle?
Becoming a Blockchain Oracle is simple Oracle or Node needs to find reliable data sources that Smart Contracts are looking for and then feed the data to the smart contracts as and when they require it. Many companies are making it easier to write data on-chain by letting individuals set up nodes. You can get more info on this subject by reading What is a chainlink node operator? Once you set up a node with one such company, you can source your data from a data provider. If you are interested in providing Forex and CFD data to Smart Contracts, you can signup with TraderMade and get your API Key. We provide 1000 requests a month for free that are plenty to test your Oracle or Node. Then all is left is to start setting a price at which to fulfil requests from smart contracts.
If you need any more information on becoming a node provider or getting data into your own Smart Contract, please contact us. We are always open to suggestions and ideas so don’t hesitate to get in touch.