What Are Smart Contract Oracles?
One of the bigger bumps in the road for the adoption of blockchain based technologies has been not only the ability to communicate real-world data into a blockchain ecosystem but, more importantly, know that this data is accurate. With the assurance that the information fed into a smart contract is trustworthy, these contracts can be automated to execute economic activity on the blockchain based on the same information that we use to make decisions today.
Oracles are the direct solution to the first issue of communicating events that happen all around us to a blockchain ecosystem. Since the nodes in a blockchain are not capable of querying or processing outside information, oracles assume this role and act as a medium between the blockchain and off-blockchain-world events; such as the outcome of a national election, the results of a soil composition test, changes in the price of oil, flight delays, major weather patterns, or any other event that can cause an action or inaction to take place can all be fed into a smart contract by using an oracle. The information supplied by the oracle will fill variables that are set to satisfy “if, then” conditional statements. As conditions are satisfied, the smart contract will be triggered into conducting autonomous economic activity on the blockchain which hosts the smart contract.
With an oracle as a solution for the immediate problem of data translation and communication, what could be the solution, then, for trusting these oracles? Clearly, without a high level of confidence that the information being provided to a smart contract is accurate, no one would sign on to it. Bad actors exist in both the real and digital world and the operator of an oracle could falsify information in order to profit from smart contracts they both feed data into and are bound by. The historic and appropriate (considering the decentralized nature of blockchain technology) answer to this problem is the free market where oracles are allowed to compete. Decentralized marketplaces have begun to emerge where oracles and the data they provide can be curated on one platform yet remain independent from any centralized control. This will ensure that in the long term, the oracles that competed for community trust and supplied accurate information will survive while those oracles that did not meet a market standard or that clearly manipulated their data will be exposed and fail.
The creation of decentralized oracle curation markets, to many, is considered the next essencial, monumental, and competitive area needed on the path to the mass adoption of blockchain technology. The ability to replicate the real-world with the digital-world in real time will lead to those revolutionary concepts you always hear and think about actually coming to fruition.