What is Oracle?
To put it simply, Oracle are systems that provide real-time data for blockchains and smart contracts. These data can be prices (e.g. Bitcoin, Ether prices), news (election results)… Thanks to Oracle, blockchain and smart contracts on-chain (on-chain) can interact with external data. off-chain…
With these characteristics, Oracle becomes an indispensable component in many fields such as derivatives market, insurance, exchange, etc.
Oracle classification
Oracle can be divided into two basic types: internal oracle and external oracle.
Internal Oracle: are Oracles created just for the project. Some typical projects have their own Oracle such as Maker, Uma, Augur, Compound.
External Oracle: These are projects specialized in Oracle, used to provide data to other partners. Some of the prominent names are Chainlink, Band Protocol, Tellor, DIA, NEST Protocol, DOS Network.
How it works
Most Oracles work like this:
- One party requests to provide data, this can be a dApp, smart contract, etc.
- After receiving the request, Oracle will get external information through nodes.
- Next, there will be a validation department (average calculation, true false information). This department is also responsible for authentication to penalize nodes that commit fraud and provide false information.
- Finally, return the results to the data requester.
Invest in Oracle projects
Tokens of Oracle projects usually have the following roles:
- Pay per data request.
- Reward nodes, data evaluation department.
- Stake to become the node, the data reviewer.
Therefore, if Oracle has more partners, the demand for the token will increase, leading to a positive move in the price of the token.
Besides considering the above applications, to invest in Oracle tokens, investors need to consider the ecosystem that Oracle is supporting. For example, Band Protocol currently supports 7 blockchains, Chainlink currently supports 72+ blockchains, and more. The more blockchains Oracle supports, the more customers they will have.
summary
Oracle is an indispensable part in DeFi in particular or the crypto world in general because its extremely important application is the bridge between the real and virtual worlds. Therefore, Oracle is considered as a potential investment segment in the future.
Compiled from Coin98.net
