• About Us
  • Careers
  • Contact
No Result
View All Result
Thursday, October 30, 2025
DeFi Planet
  • News
    • People
    • Business
    • Crime
    • Regulation
    • Crypto
    • CBDC
  • Markets
    • Bitcoin
    • Ethereum
    • Stablecoins
    • Altcoins
    • Crypto ETFs
    • Memecoins
  • Policy
  • Articles
    • Press Releases
    • Opinion
    • Explainers
    • Guest Post
    • Sponsored
  • Directory
    • Companies
    • People
    • Products
    • Wallets
  • Multimedia
    • Videos
    • Podcasts
  • Learn
    • DeFi Basics
    • Tutorials
    • Reviews
    • Blockchain Fundamentals
  • Research
    • Case Studies
  • Explore
    • DeFi
    • Crypto Gaming
    • NFT
    • DAO
    • Metaverse
    • Glossary
  • Jobs
  • Markets Pro
    • DeFi Planet Pro
    • Spend Crypto
    • Swap Crypto
    • Coin Prices
    • Crypto Exchanges
    • Crypto Analyzer
  • News
    • People
    • Business
    • Crime
    • Regulation
    • Crypto
    • CBDC
  • Markets
    • Bitcoin
    • Ethereum
    • Stablecoins
    • Altcoins
    • Crypto ETFs
    • Memecoins
  • Policy
  • Articles
    • Press Releases
    • Opinion
    • Explainers
    • Guest Post
    • Sponsored
  • Directory
    • Companies
    • People
    • Products
    • Wallets
  • Multimedia
    • Videos
    • Podcasts
  • Learn
    • DeFi Basics
    • Tutorials
    • Reviews
    • Blockchain Fundamentals
  • Research
    • Case Studies
  • Explore
    • DeFi
    • Crypto Gaming
    • NFT
    • DAO
    • Metaverse
    • Glossary
  • Jobs
  • Markets Pro
    • DeFi Planet Pro
    • Spend Crypto
    • Swap Crypto
    • Coin Prices
    • Crypto Exchanges
    • Crypto Analyzer
No Result
View All Result
DeFi Planet
No Result
View All Result
Home Articles

What is a Blockchain Oracle?

21 April 2022
in Articles, Opinion
Reading Time: 7 mins read
108 6

Interconnectivity and communication are important in blockchain-based platforms. In the context of a blockchain, an oracle is a trusted third party that provides information about the state of the blockchain. Most crypto-related projects require access to data from reliable sources to function. Decentralized finance platforms are designed to operate with the aid of real-time information from reliable sources. The same can be said for some non-fungible token projects and other blockchain-based platforms. 

For example, an automated market maker may depend on an oracle to access the prices of different tokens on several exchanges, allowing it to decide on the appropriate price based on its algorithm. This article comprehensively analyzes the complexities of a blockchain oracle system. 

What is a Blockchain Oracle?

A blockchain oracle is an independent third-party platform that connects a blockchain ecosystem to both on-chain and off-chain data sources. Smart contracts would struggle to operate in the absence of blockchain oracles because they would lack the requisite data. Typically, the tenets of a smart contract are activated when particular conditions in the data set are transmitted.

The blockchain oracle’s function is to query, verify, and validate information before transferring it to the recipient. Oracle-powered platforms typically query a wide range of data sets, including price details, weather forecasts, and much more.

Smart contracts would struggle to operate in the absence of blockchain oracles because they would lack the requisite data. Typically, the tenets of a smart contract are activated when particular conditions in the data set are transmitted.

The blockchain oracle’s function is to query, verify, and validate information before transferring it to the recipient. Oracle-powered platforms typically query a wide range of data sets, including price details, weather forecasts, and much more.

Why Are Blockchain Oracles Important?

The concept of a blockchain oracle was created because blockchains are isolated. 

Different blockchains are designed to operate independently of one another, making interoperability difficult.

A platform on Ethereum may require data from Binance Smart Chain at times, and obtaining this data without the use of an oracle layer is challenging.

Second, oracles were developed because blockchains could not access data from off-chain sources. To function efficiently, smart contracts require either off-chain or on-chain data sources. 

An oracle serves as a link between the information sought by a crypto platform and the source of the data.

What Are The Use Cases of Blockchain Oracles?

Blockchain oracles are used in different capacities in the blockchain ecosystem because of their ability to query, validate, and transmit accurate data from multiple sources.  

Futures

Futures have been around in the traditional finance industry for a while, but they have now made their way into the crypto market. They are a type of financial instrument used to hedge risks by enabling a trader to buy or sell an asset at a specific price and time in the future. Some decentralized finance protocols include futures options such as eternal contracts. Oracle price data is used by platforms that offer futures.

Decentralized Finance (DeFi)

The Decentralized Finance space has multiple features that attract users. DeFi eliminates the obstacles associated with traditional finance, which revolves around a difficult means of entry.

DeFi platforms offer a wide range of solutions that depend on data for several reasons. 

Many of them must rely on oracles to run their businesses. One example is a decentralized exchange.

Insurance Protocols

Several crypto platforms rely on insurance protocols to mitigate risk. Some also have coverage against smart contract risks, wallet issues, and much more. The structure of the insurance platform determines when a payout is made. Typically, insurance platforms employ oracles to determine whether an event has occurred to trigger a payout.

The NFT Ecosystem

Oracles aren’t just for DeFi Protocols; they also have some applications in the NFT space. An oracle could be used by an NFT gaming platform to introduce a new feature that benefits players. 

An oracle can be used by a Play-to-Earn platform to include a random NFT or loot box. 

Let’s say an NFT project is looking for a way to pick a group of lucky winners at random from those who took part in an NFT drop. They can make use of a blockchain oracle for this. As new blockchain-based platforms emerge, the use cases for a blockchain oracle are increasing.

What Are The Different Types of Blockchain Oracles?

Blockchain oracles are available in multiple formats to serve numerous objectives or perform in various capacities. 

Some Oracle platforms provide several of the following, while others may only offer one. 

Human Oracles 

Highly specialized professionals can operate as oracles by researching various queries, gathering information, validating it, and transmitting it to the smart contract. 

This type of blockchain oracle is knowledgeable and can detect whether a hacker is attempting to feed the smart contract incorrect information or when a piece of data from a source is inaccurate.

This type of oracle is effective to some extent due to its knowledge and reputation.

Decentralized Oracle

The concept of a decentralized oracle system developed as a result of the risk of a single point of failure. There is no single entity in charge of its operations, and data is queried, verified, and transmitted by multiple parties. Multiple oracles collaborate in a decentralized oracle, and when an oracle is compromised, it is retired.

Centralized Oracle 

A centralized oracle is a system that is controlled by a single authority, and everything that happens is dependent on that entity. 

They are in charge of gathering information, validating it, and transmitting it. In this oracle mechanism, the risk of a single point of failure is high.

Customized Oracles

Some decentralized finance oracles customize their oracle systems so that only their smart contracts make use of the oracle. 

In this case, the DeFi protocol may agree with an oracle platform to construct an oracle system that matches their requirements and can only be used by the DeFi protocol. 

Choosing this option is far more expensive than utilizing a standard oracle mechanism.

Inbound Oracles

This type of oracle connects the smart contract to the platform’s outside world to receive data from outside sources and transmit it to the smart contract. An inbound oracle can be used by a platform that requires data from outside its ecosystem.

Outbound Oracles

Oracles that send data outbound from the platform to external recipients are known as “outbound oracles.” 

Outbound oracles are used by protocols to connect to other protocols via information transmission.

What Are Popular Examples of Blockchain Oracle Platforms? 

There are different examples of blockchain oracles, each with its own set of features. As always, it is important to conduct due diligence before using their services. ChainLink, Provable, Paralink, Witnet, and Dos.Network are some popular examples.

What Are the Risks Attached to Blockchain Oracles?

Though blockchain oracles are revolutionary, they have a fundamental limitation: they can be compromised. By transmitting inaccurate information to a crypto platform, hackers can exploit the vulnerabilities. Once it is compromised, the smart contract that relies on it suffers as well.

Assuming a smart contract operates by utilizing pricing information from an oracle and data from on-chain sources, a hacker could intercept the data before it reaches the smart contract and tamper with it, causing the system to perform erroneously. The hacker may be able to gain access to funds as a result of this action.

Blockchain oracles are typically not included in the security architecture of a platform. 

They are designed and managed by third parties. This means that a crypto platform cannot control or tamper with the security structure of the oracle. They must hope that the blockchain oracle system is not adversely affected.

Aside from hackers obtaining access to the data feed, the platform that manages the data feed may upload inaccurate data, fooling the oracle into believing it is accurate. The oracle may inadvertently obtain data from inaccurate sources.

In Conclusion,

  • Blockchain oracles are crucial to the operation of many smart contracts. 
  • They connect smart contracts to the requisite data. 
  • They differ in type depending on the platform’s goal.
  • Protocols can customize their blockchain oracles. 
  • Some blockchain oracles focus on moving information into a platform, while others focus on moving information outward.
  • Sometimes, a blockchain oracle may be a human being. 
  • There is a risk that the blockchain oracle may transmit inaccurate information to users. 
  • The need for blockchain oracles cuts across DeFi, NFT, and other blockchain-based platforms. 
  • While opting for a blockchain oracle, ensure to conduct due diligence.

 

If you would like to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, and Instagram.

 

Share66Tweet42Share12
Rose Nnamdi

Rose Nnamdi

Related Posts

The Password Apocalypse: Can Blockchain Digital Identity Save Us?
Articles

The Password Apocalypse: Can Blockchain Digital Identity Save Us?

26 October 2025
The State of DeFi in Africa: Challenges and Growth Potential Ahead
Articles

The State of DeFi in Africa: Challenges and Growth Potential Ahead

26 October 2025
Articles

Decentralized Timekeeping: Who Sets the Clock in Web3?

22 October 2025
Ethereum vs Bitcoin: Innovation vs Stability — Which Strategy Will Win the Next Decade?
Articles

Ethereum vs Bitcoin: Innovation vs Stability — Which Strategy Will Win the Next Decade?

19 October 2025

Editors Picks

Mining vs. Staking: Which Crypto Validation Method Will Shape the Future?

Mining vs. Staking: Which Crypto Validation Method Will Shape the Future?

byOlajumoke Oyaleke
15 July 2025
0

Where Are the Ethereum-Killers Now?

Where Are the Ethereum-Killers Now?

byOlayinka Sodiqand1 others
6 January 2025
0

source: investorplace.com

How to Find the Newest Cryptocurrencies Before They’re Listed

byOlayinka Sodiq
30 December 2024
0

Exploring the Role of AI in Enhancing DeFi Security

Exploring the Role of AI in Enhancing DeFi Security

byOlayinka Sodiq
1 October 2024
0

The Ultimate Guide to How NFT Royalties Work

The Ultimate Guide to How NFT Royalties Work

byAdedamola Ojedokun
17 April 2024
0

Read More

Chain of Thoughts

The Aesthetics of Web3: Why Vibe Matters in Decentralized Communities

The Aesthetics of Web3: Why Vibe Matters in Decentralized Communities

byOlu Omoyele
27 September 2025
0

...

Zero-Knowledge Everything: Trust, Privacy, and Verification in the Digital Age

Zero-Knowledge Everything: Trust, Privacy, and Verification in the Digital Age

byOlu Omoyele
30 August 2025
0

...

What Happens When AI Gets a Wallet?

What Happens When AI Gets a Wallet?

byOlu Omoyele
31 July 2025
0

...

The Game-changing Triumvirate: Blockchain, Data Science, and Artificial Intelligence

The Game-changing Triumvirate: Blockchain, Data Science, and Artificial Intelligence

byOlu Omoyele
30 June 2025
0

...

Markets Update

Can Confidential Lending Unlock Trillions for DeFi Markets?

2 days ago

Impact of Large Ethereum Validator Exits on ETH Price

2 days ago

Leading Asset Classes in the On-Chain Real-World Asset Tokenization Trend

2 days ago

KuCoin Pay Partners with Swapped Connect to Streamline Direct CEX Payments for Web3 Users

2 days ago

Are Ethereum-Based Treasuries Emerging as the Berkshire Hathaway of Crypto?

5 days ago

Is the Crypto Market Now Majorly Driven by Institutions?

5 days ago
Read More

Events

  • No events
  • Spotlight

    All about Ethereum
    All about Algorand
    All about Bitcoin
    All about Gora

    Press Releases

    Bybit’s bbSOL Gains Institutional Custody Support from Anchorage Digital, Reinforcing Its Institutional-Grade Standing

    bychainwire
    30 October 2025
    0

    Whale.io Confirms First Airdrop for Crock Dentist NFT Holders

    bychainwire
    29 October 2025
    0

    Acre Launches V2 Platform, Enabling Bitcoin Holders to Earn 14% APY (est.) from Self-Custody

    bychainwire
    29 October 2025
    0

    BitcoinOS $BOS Token Is Live On Binance Alpha And Top Tier CEX Listings, Advancing Institutional BTCFi

    bychainwire
    29 October 2025
    0

    Swiss Bitcoin App Relai Acquires MiCA License in France

    bychainwire
    27 October 2025
    0

    Read More

    ADVERTISING

    ABOUT

    TEAM

    CAREERS

    CONTACT

    TERMS & CONDITIONS

    PRIVACY POLICY

    © Copyright 2025 DeFi Planet

    Welcome Back!

    Login to your account below

    Forgotten Password?

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In

    Add New Playlist

    No Result
    View All Result
    • News
      • People
      • Business
      • Crime
      • Regulation
      • Crypto
      • CBDC
    • Markets
      • Bitcoin
      • Ethereum
      • Stablecoins
      • Altcoins
      • Crypto ETFs
      • Memecoins
    • Policy
    • Articles
      • Press Releases
      • Opinion
      • Explainers
      • Guest Post
      • Sponsored
    • Directory
      • Companies
      • People
      • Products
      • Wallets
    • Multimedia
      • Videos
      • Podcasts
    • Learn
      • DeFi Basics
      • Tutorials
      • Reviews
      • Blockchain Fundamentals
    • Research
      • Case Studies
    • Explore
      • DeFi
      • Crypto Gaming
      • NFT
      • DAO
      • Metaverse
      • Glossary
    • Jobs
    • Markets Pro
      • DeFi Planet Pro
      • Spend Crypto
      • Swap Crypto
      • Coin Prices
      • Crypto Exchanges
      • Crypto Analyzer

    © Copyright 2024 DeFi Planet   |   Terms & Conditions   |   Privacy Policy

    -
    00:00
    00:00

    Queue

    Update Required Flash plugin
    -
    00:00
    00:00