Smart contract + Oracle

Understand oracle like 5 year old

Author

Ayush chaudhari
January 06, 2023

Gm Mouse Army ,

Today's newsletter will explain how oracles are used in smart contracts and what role they play in today's world.

ORCALES + SMART CONTRACT

Oracles can be understood as a massive database of reliable information just like a Book Library. Oracles are Third-Party entities responsible for providing us with reliable data far beyond our scope. For the context of Blockchain and why we need Oracles, Blockchains are very self-centered and have no knowledge outside of their scope as Blockchains and their Smart Contracts cannot use Google or any other third-party libraries to query any information beyond their scope because as we know, Blockchains are made to store Transactions and Data. However, we can write Smart Contracts which can depend on and query third-party data like the price of gold, the Air Index of a specific area, or even the temperature in the different regions of wherever you want.

Oracles serve as a bridge between the blockchain and the outside world, feeding the smart contract with data from the outside world. However, one should not consider oracles to be something extremely complex and significant. They are merely code bases of certain topics of interest that include widely believed facts.

A very simple use of Oracles can be used to make and keep track of Synthetic Stablecoins such as USDC/USDT which tracks the price of USD. Using Oracles, you can create a synthetic stablecoin coin such as USDX which keeps on with the price of USD provided by the oracle.

The problem with Oracles is that you can't depend on only one Oracle which implements that your project will be centralized and will fail with one point of failure.

This is where Decentralized Oracles like Chainlink come into the picture. Chainlink is a decentralized Blockchain built on Ethereum that provides reliable Information.

These Oracles can provide any information like Temperature in your Region, Prices of stocks and other commodities, and even the number of users on a specific website.

Thank you