What Is a Blockchain Oracle, and Why Do I Need One?

What Is a Blockchain Oracle, and Why Do I Need One?

A blockchain oracle is a piece of software that connects the real world to the blockchain. In other words, it allows data from outside the blockchain to be used in smart contracts and other applications running on the blockchain. This is important because smart contracts can only access data that is stored on the blockchain itself. (Also Read: The 7 Worst Mistakes New Crypto Traders Make)

What is a blockchain oracle?

In its most basic sense, a blockchain oracle is a piece of software that allows data to be retrieved from external sources and passed into smart contracts on a blockchain. This makes it possible for blockchains to interact with real-world data, which is important for many use cases like managing the supply chain, keeping track of assets, and verifying an identity.

There are a few different types of oracles, but the most popular one is an API (Application Programming Interface) oracle. An API server connects to an external data source via an API and then passes that data into the relevant smart contract on the blockchain. The advantage of using an API database is that it is relatively easy to set up and use.

The other type of oracle is an oracle contract. An Oracle Contract is a smart contract that contains code that allows it to interact with external data sources. The advantage of using an Oracle contract is that it offers more flexibility than an API contract, but it can be more difficult to set up and use.

So why should you care about blockchain oracles?

Well, if you are developing a decentralized application (DApp) that interacts with real-world data, then you will need to use one. Without a blockchain oracle, your DApp would only be able to use data stored on the blockchain, which would make it much less useful.

What are the different types of blockchain oracles?

Due to the complexity of off-chain resources, blockchain oracles can be used to address many scenarios. This section will cover some of these oracle types.

Input oracles
Smart contracts can interact with real-world data sources using input oracles. These are the most well-known types of oracles. DeFi smart contracts that pull off-chain data from financial markets are an example of an input oracle.

Output oracles
Output oracles can be used to replace input oracles. They enable smart contracts to send instructions off-chain to trigger certain actions.

Cross-chain oracles
Cross-chain Oracles make it possible for blockchains to talk to each other by moving data and assets between them and connecting assets across the chain so they can be used outside of their host protocols.

Compute-enabled oracles
Compute-enabled Oracles use secure off-chain computation functions to provide decentralized services that are impossible to run on-chain because of the rigid structure of blockchain networks.

What are the pros and cons of an Oracle blockchain?

When it comes to blockchain oracles, there are pros and cons that come along with this technology. Here is a look at the pros and cons of using an Oracle blockchain:

Using an Oracle blockchain can help improve the accuracy of the data that is stored on the blockchain.

Oracles can help smart contracts on the blockchain get data or information from off-chain, which can make smart contracts run.

-Oracles can help to speed up transactions that are based on conditions that need to be met.

If oracles aren’t used correctly, they can make the blockchain network less secure and open to security risks.

Oracles can be tainted if they are not made and managed in a decentralized way.

Why would you use a blockchain oracle?

If you’re not familiar with the term “oracle,” it’s basically a data source that provides information to a smart contract. This could be something as simple as an API that fetches the current price of a cryptocurrency or the weather in a certain location.

Blockchain oracles are particularly important because they provide external data to a blockchain, which is otherwise isolated from the outside world. This is very important for many decentralized applications (dapps) that need data from the real world to work.

There are many reasons why you would want to use a blockchain oracle. Perhaps you’re building a dapp that needs to track the price of a cryptocurrency in order to execute certain logic. Or maybe you’re developing a prediction market and need to pull in data from various sources in order to settle bets.

In any case, if you’re working with blockchain technology, there’s a good chance you’ll need to use an oracle at some point. Fortunately, there are many options available, so you should be able to find one that meets your needs.


If you’re interested in developing applications on a blockchain platform, then understanding how oracles work is critical. Oracles provide the link between the blockchain and the outside world, and without them, many of the most exciting potential use cases for blockchain technology would not be possible. (Also Read: 5 Tips for Swapping Cryptocurrencies)

Also Read:  Raymond Arroyo Net Worth: Exploring Human Thinking
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