What is a BLOCKCHAIN ORACLE PROBLEM? And how can CHAINLINK solve it?


The Greek mythological story of the oracle explains that it refers to people who can communicate with god and predict what the future will look like. Oracles on the blockchain, however, do not predict the future like the oracles in Greek mythology. Instead, they retrieve past data. Oracles don't insert data directly into the blockchain, but instead, collect and store data from real life.


Based on the traits that govern source, the direction of information, and trust, there are three types of blockchain oracles:

Software Oracles

They communicate with online information sources (databases and servers, websites), and then pass that information to blockchain smart contracts in real-time. This information includes digital asset prices, real-time flight information, and exchange rates.

Hardware Oracles

These oracles can retrieve information from electronic sensors, barcode scanners, and other information-reading devices. The hardware oracles convert real-world events to digitally understandable forms for smart contracts that can be used to execute decisions.

Inbound and outbound Oracles

Inbound Oracles transmit information from outside sources to the smart contract. Smart contracts are notified of temperature data, for example. Outbound oracles, on the other hand, transmit information from smart contracts to the outside world. The smart contract, for example, sends information when funds are deposited to a specific address to enable the mechanism to unlock the smart lock.

Both centralized and decentralized Oracles

Central oracles are governed by a single entity, while decentralized ones do not rely upon a single source of information to send the data to smart contracts. One point of failure directly hinders the centralized Oracles. Decentralized Oracles build trust, and are therefore considered consensus oracles.

Human Oracles

Oracles are individuals who have specific knowledge of a subject. They can verify the authenticity and send it to smart contracts by conducting in-depth research. The chances of data corruption and identity fraudsters are reduced when humans are involved with cryptography in verifying their identities.

Oracles for Contracts

These oracles can be used with a single smart contract. Because they are created from scratch, developers can customize them to meet specific requirements. They can't be used to extract data from other sources and are difficult to maintain.

Chainlink: How can we overcome Blockchain Oracle?

Chainlink employs a structure or model that is very similar to a blockchain. A decentralized network of autonomous Oracles (which together retrieve the data from different sources, aggregate it and deliver a valid, single data point the smart contract to accelerate its execution to eliminate any failure points.

Click here for more details: https://www.leewayhertz.com/chainlink-solving-blockchain-oracle-problem/

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