The Role of Blockchain Oracles in Making Smart Contracts Smarter

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So many impacts and transformation that the Blockchain technology has been offering to a lot of industries all across the world and that is majorly due to some unique attributes that the blockchain technology possesses. Examples like transparency, security, the Decentralisation nature and more. But even with those attributes that help foster the adoption of the Blockchain technology, it also have it's own limitations which I will be discussing today.

Starting from one of the challenges I have seen that the Blockchain space faced is that it does not yet have access to off chain data. Data like the stock prices, or even sport scores. These hindrances is functioning against the Blockchain technology adoption majorly in the aspect of smart contracts. But there is actually a solution that comes up to address this which I will be discussing today and that is the Blockchain oracles. Over the recent years, I have come to discover that the Blockchain oracles have been helping to solve problems to help verify and also retrieve off chain data back to the on chain smart contracts.

Even before moving to the topic for today, I will like to establish what it blockchain oracle really means to give up a more deeper understanding about it. When we talk about the Blockchain oracles, it actually means services that helps to give smart contracts with data. Majorly they are referred to as bridges because they serve as bridges which help to sustain maintain smart contracts from different data.

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Let me use the example of the Decentralised DeFi application which actually uses stock prices to carry out trade automatically. They will need smart contract to help get data. When it comes to the Blockchain oracles, their strength lies in the aspect that they are flexible. They can serve as centralised l, Decentralised and this is why oracle can even be used by centralised platforms and also by Decentralised platforms.

Moving to talk about the goes of blockchain oracles as it consists of different types with different reasons and data requirements also. I will be talking about some of them below:

• Software Oracles.

The software oracles will help to get data using online sources like web servers. In fact till today, the software oracles is seen to be the most common type of oracle's and is mostly used even in DeFi platforms due to the fact that it gets data from online sources. Software oracles have a lot of usages like helping to determine market prices, notice exchange rates and other online data. It is one of the most efficient types of Blockchain oracles.

• Hardware Oracles

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The second one I will like to talk about is the Hardware Oracles. As the name implies, hardware, it takes its data using physical data as compared to the software oracles that makes use of online sources. Hardware oracles is mostly used when it comes to the supply chain management and one of the major strength is the ability to be able to get information that are real time based on location, based on humidity and even temperature. Most of the time it is used when there is a need to get data based on environmental conditions.

• Inbound and Outbound Oracles Inbound

The last oracles I will like to talk about is the inbound and the outbound oracles. This is one of the less common type of the Blockchain oracles as it is two in one. For the inbound oracles, it helps to supply data from other external channels to the Blockchain while when it comes to the outbound oracles, reverse is the case as it helps to send data from the Blockchain to those external channels.

Due to the lot of potentials and uniqueness that the Blockchain oracle possesses, it can be able to actually have a lot of benefits it offers and some of the benefits I will be talking about is below;

• Expanding DeFi Capabilities

The first is that it helps to enlarge the DeFi capabilities. What do I mean by that? As many of us know, the DeFi world is the sector in the Blockchain that is fast developing and so depends on data and not just anyone data but accurate data. Oracles help DeFi platforms to get data needed for maintaining the liquidity pools.

• Enabling Decentralized Insurance Smart Contracts

The second benefit I will like to establish is that it helps to enable the Decentralised insurance smart contracts. Smart contracts when it comes to the insurance aspect need external data outside the Blockchain space. With oracle, you are able to get those data and not just the anyone data but verified data that will help reduce human error.

• Automating Supply Chain Management

The last important I will like to talk about is the fact of automating the supply chain management. In fact this is key because most of the time, the supply chain is found to be so complex because it always involves a lot of middlemen. But with oracles, you are able to get those real time data needed for the smart contract to carry out the needed action.

Even with lot of benefits and potential that the Blockchain oracles is capable of offering, it also have it's own challenges and limitations that needs to be looked into. I will pick just two and discuss about it below;

• Security and Trust Issues

The first one is the Security and the trust issue. In fact this has proven to be the major challenges that the Blockchain oracle is facing because it can sometimes be compromised most especially the centralised type of oracle. Most of the times when this limitation is not tackled, it can lead to huge financial loss and even contracts failures at the end of the day.

• Oracle Manipulation and “Oracle Attacks”

The second challenge that the blockchain oracle face is the Oracle Manipulation and which is sometimes called the oracle attacks. In fact this is most of the time severe because data collected by the oracle can be manipulated and which sometimes gives wrong results for smart contracts.

In conclusion, I will like to establish that Blockchain oracle played a very important and major role in the transformation of the smart contract and I believe it will just continue to get better and better with time. There are so many potentials that the Blockchain oracle has to offer and even though it has it's own challenges and limitations just like I discussed above, I believe it is just a matter of time before it is been tackled.