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
- Request initiation – The smart contract emits an event requesting specific off-chain data (e.g., a random number).
- Data retrieval – Oracle nodes listen for these requests and fetch the required data from external sources, such as APIs or IoT devices.
- 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.
- 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)
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.