Oracles don’t have to be complicated, in fact, understanding an Oracles role can be easily understood by understanding the peripheral mechanisms that allow them to operate. When you can grasp a better understanding of how the whole thing works, the purpose of each part becomes apparent.
Simply put, an Oracle is a middle man between the real world and a blockchain-based application. An Oracle triggers the execution of the smart contract by verifying the contract’s requirements with real-world data to ensure all criteria have been fulfilled. Once the data has been verified, voila, your transaction is complete.
Accessing Real-World Data
The external data the Oracle relies on comes in many forms and the data the Orale accesses classifies what kind of Oracle it is.
Software Oracles access information data that can be accessed through any online source. This can be such information as real-time prices, commodities, logistical information, and many others.
Hardware Oracles gather information data from the outside world via physical means. Hardware articles gather data from things like RFID sensors counting cars at an intersection, or touch sensors counting the number of people walking through a particular area.
Centralized Oracles act as a standalone source of external information which is fed into a smart contract within its dictated security parameters. Since the smart contract is relying on this single party for its information centralized oracles don’t provide a high level of trust.
Decentralized Oracles are the opposite of Centralized Oracles in that they rely on a variety of external data sources providing a stronger level of trust for the information it provides to the smart contract.
Trust is Everything
DeFi cannot exist without a mechanism that provides the highest level of trust. On the whole, there are two kinds of trust available — secure and slow or fast and insecure. It’s obvious that a solution is needed to create fast and secure trust that can capture massive opportunities for the adoption of blockchain technology. Paralink combined with Polkadot will provide this trust.
When data sources and their data can be trusted and coordinated more efficiently we solve the Oracle problem and usher in an age where blockchain technology can really flex its features.For more information on Paralink visit the Paralink Network website.