2.3.0. Third Component – Oracles
Hopefully, you are following this progressive discussion:
First: a blockchain is built. When smart contracts are built on a blockchain, that blockchain becomes a smartchain.
Second: a DApp, which is an application, is built and it is connected to the smartchain so that the application becomes automated and decentralized.
The obvious question will be: What will connect a DApp to a smartchain?
In other words, imagine if Charis lives in Pretoria and she wants to connect her DApp to Ethereum smartchain so that anyone at any place in the world can access her lending business’ services. What will connect her DApp to the Ethereum smartchain?
The device that Charis will need to connect her DApp to the Ethereum smartchain is named Oracle. The oracle will be the link between Charis’ DApp and the Ethereum smartchain.
Consider it this way. When God wanted to relate with the Jews and save them from slavery in Egypt, He sent Moses to them. Moses was a Prophet, the mouthpiece of God.
One of the assignments of Moses was to ordain Aaron into the Priesthood office. Being the Priest, Aaron would stand as a link between the Jews and God. He would be an oracle that would connect his people to God.
Likewise, a crypto oracle is the link between a DApp and a smartchain. An oracle is, thus, the third component of a Decentralized Market System.
A crypto oracle sends data from the outside world (DApps) to a blockchain. The smart contract on the blockchain can then use the data to make a decision on what to do.
Thus, for her lending business to be accessed automatedly around the world, Charis will have to connect her DApp to a smartchain using an oracle. She can do this by looking for a crypto oracle that will not only correctly connect her DApp to a smartchain, but an oracle that will allow all the information (data) in her DApp to be fully expressed and maximized.
In other words, there are different crypto oracles for different uses. One oracle may only be able to function in lending services, the other may be for savings, and yet another may be for gaming. Charis will need to get the one that suits her business. If she cannot find any good oracle for her business, she can work with her IT experts to have one built specifically for her DApp.
The data on Charis’ DApp is known as off-chain data while the data stored on the smart contract of the blockchain are known as on-chain data.
Oracles are, therefore, computer programs that connect data from the outside world (off-chain data) with the blockchain world (on-chain data).
Examples of Oracles in the Crypto Market are Chainlink, Witnet, and Provable.