What is Oracle? Simple explanation for newbies. And learn about a typical Oracle project on Cardano Blockchain.
When learning about crypto, you will definitely hear about Oracle. So what is Oracle and why is it so important? Are there any Oracle tokens that you should know about?
Note: Because the word Oracle appears in many fields, but in this article I will only talk about blockchain. If that is not the information you are looking for, you can skip it!
Before going into the definition of what Oracle is, I want to give an example for you to understand.
For example: Alice and Bob bet $1,000 to see who will be President of the United States in the December 2020 election. Will Trump or Biden win?
Everyone transfers funds to the Smart Contract and waits for the results. After the official results are announced, this amount of $2,000 will be transferred to the person who guesses correctly.
But because Smart Contracts cannot interact with external data. So it will need a reliable data feed to execute.
And that is where Oracle appears “like a god”.
What is Oracle?
Oralce is a third-party service that provides real-time data for blockchain and Smart Contracts.
Oralce itself is not the data, it just searches, verifies the data and then transmits that information.
Note: A smart contract or smart contract is a self-executing contract without anyone’s influence. As in the example above, whoever wins the bet will automatically transfer money to that person.
Thanks to Oracle, blockchain and Smart Contracts (on-chain) can interact with external data (off-chain) and vice versa.
Or in other words, Oracle is a “bridge” between blockchain and the wider world outside.
Oralce helps expand the scope of Smart Contracts, so it plays a huge role in the blockchain ecosystem.
Oracle classification
Oracle can be classified as follows:
1) Data origin
Based on this classification, we have two types of Oracle: data from software and data from hardware. Software Oracle is basically any data on the Internet hence it is the most popular form of Oracle. It could be exchange rates, prices of trading pairs on the exchange or real-time flight information. Hardware-derived data is information obtained from the real world and fed back into the Smart Contract.
For example, sensors placed at ports to see if trucks have arrived to load goods have not been applied in logistics technology…
2) Data direction
Or in other words, Oracle receives/sends information from outside into the Smart Contract. The 2 examples above can also be divided according to this classification.
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3) Data reliability
That is, is this data taken from centralized or decentralized Oracle. Centralized Oracle is data provided by a single organization, so it is high risk. Meanwhile, in decentralized Oracle, data is queried and validated by many Oracles based on a consensus mechanism.
Oracle problems
Oracles take information outside the chain so it is not protected by the blockchain’s security mechanism.
In other words, when Oracle is attacked, the Smart Contract that relies on it is also attacked.
Typical Oracle project: Orcfax Oracle
Orcfax is a decentralized data service for the Cardano blockchain. This service is responsible for collecting data from the real world (eg prices, weather, event results…) and uploading them to the Cardano blockchain as “facts” for contracts. smart coins, scripts, and decentralized applications (dApps) on Cardano can be used.
Some main features of Orcfax:
— Decentralized: Data on Orcfax is collected from many different independent sources, then authenticated by a distributed network of audit nodes. This helps ensure data reliability and tamper resistance.
- Transparency: Orcfax provides a complete audit log of data collection and validation. Anyone can check the validity of the data before using it.
- Ease of use: Data on Orcfax is provided in Cardano’s native eUTXO format, compatible with most smart contracts and dApps on this blockchain.
- Security: Orcfax uses advanced security mechanisms to ensure data security and prevent attacks.
Orcfax plays an important role in developing the DeFi (decentralized finance) ecosystem on Cardano. Smart contracts and dApps can use real data from Orcfax to create more innovative and reliable financial applications.
Orcfax can be used:
— Create more innovative decentralized finance (DeFi) applications: Orcfax can be used to create new DeFi applications, such as derivatives exchanges based on the actual price of assets assets, lending and borrowing platforms based on users’ credit history, or automated investment funds based on market indices.
— Create more trustworthy decentralized insurance (DeFi) applications: Orcfax can be used to create more trustworthy DeFi insurance applications by providing real-world data on insurance conditions , such as weather, prices, or the insured’s health condition.
— Create more transparent decentralized governance (DeFi) applications: Orcfax can be used to create more transparent DeFi governance applications by providing real-world data on polls, elections, or other governance decisions.
Orcfax is still in development, but it has the potential to become an important tool for the development of the DeFi ecosystem on Cardano.
Website: https://orcfax.io/
TwitterX: https://x.com/orcfax
