What is a blockchain oracle?

Most operations in decentralized applications are performed using smart contracts. To work, they may need a variety of data from external sources. For example, to calculate the exact ratio of the price of one cryptocurrency for another during exchange.

Data from external sources – in particular, from platforms that aggregate data on tenders and prices from many exchanges – allow us to calculate the most “fair” price that is as close as possible to the market.

However, the smart contract is unable to receive information outside the blockchain in which it is deployed. It is here that oracles come to the rescue that perform the intermediary function between the contract and the data source necessary for it.

Blockchain oracles are algorithms that usually work on the basis of the NOD of a certain blockchain.

What are the blockchain oracles?

Oracles are divided according to various criteria: the principle of work, sources of data received and their direction, as well as in the form of organization. Below are the most popular types.

Software and hardware

The former take data from digital sources: databases, servers, cloud storages, and broadcast it in real time. Hardware collect data using physical devices: “smart” sensors, chips, barcodes, RFID meters and so on

Incoming and outgoing

Oracles can have a specific specialization – either transmit information or receive from external sources. This may be necessary to increase the level of reliability and solve the problem of a single refusal point.

Centralized and decentralized

A centralized oracle is controlled by a single operator who usually uses it in its own application. This type of oracle appeared first, but due to problems with the vulnerabilities of such a crypto industry system, it gradually switched to the standard of decentralized blockchain oracles. These are systems that combine many oracles. A group of GCD is selected from it, each oracle of which performs its own “section” of the request. The first project to implement the principle of decentralized blockchain oracles was ChainLink.

The PolyChain Monsters project uses the VRF method is used to determine the contents of the Lutboxes, as well as to randomize the properties of the NFT-Tolecen properties and the choice.

Games also use VRF to create an exciting and unpredictable gaming process, in particular to accidentally select the properties of game characters. In AAVEGOTCHI, the user collects valuable crystals on the gaming card and participates in various mini-games using NFT-Graffers (AAVEGOTCHI). When a participant receives AAVEGOTCHI at the beginning of the game, he is assigned a random level using VRF.

What projects develop blockchain oracles?

Chainlink is a recognized leader in the market of decentralized oracles. Its ecosystem has more than 1300 projects in Defi, NFT and Game-Fi sectors. Chainlink does not have its own network: the project unfolds nodes in different blockchains, applications in which serves. ChainLink Oracles operate on Solana, Ethereum and EVM-compatible networks, including BNB Chain, Arbitrum, Optimism, Polygon, Avalanche and Fantom.

You can also distinguish a Band Protocol, which has approximately 80 integrations. Unlike Chainlink, the project works on its own Bandchain blockchain, created using Cosmos SDK. BAND also develops webassembly developers, which allow you to create oracles. Bandchain is controlled by a network of validators. Works with applications in Celo, Oasis and Cronos networks. Native project coin – Band.