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Oracle: The Bridge Between the Real World and the Blockchain

Though smart contracts have powerful features, they have a fatal flaw: they can only access on-chain data and cannot fetch off-chain data.

For example, a smart contract cannot know today’s weather, the stock price, or the result of a competition.

Therefore, we need an oracle.

An oracle is a type of middleware that securely feeds off-chain data to smart contracts.


How an Oracle Works in Practice

  1. Request initiation – The smart contract emits an event requesting specific off-chain data (e.g., a random number).
  2. Data retrieval – Oracle nodes listen for these requests and fetch the required data from external sources, such as APIs or IoT devices.
  3. Verification and aggregation – Multiple independent oracle nodes provide the same type of data. The network compares the responses, filters out anomalies, and aggregates results to reach consensus.
  4. On-chain submission – The verified data is packaged into a blockchain transaction and sent back to the requesting smart contract.

Example: Chainlink

Currently, Chainlink is the most famous decentralized oracle network.

It uses an economic incentive mechanism: rewarding honest nodes and penalizing malicious ones, thereby ensuring data security.


Summary

In summary, an oracle solves the problem of smart contracts being unable to fetch off-chain data, and serves as a critical bridge connecting blockchain and the real world.

ps: some people think oracle is like magic, but it’s really just well-designed data plumbing.

Top comments (1)

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umang_suthar_9bad6f345a8a profile image
Umang Suthar

Great read!
Oracles are the bridge… but what if the blockchain itself could think once it got that data?
That’s where things get wild: AI models running natively on-chain, scaling infinitely, and costing less than cloud.

That’s exactly what haveto.com is doing, giving smart contracts both the data and the brainpower to use it.