The Critical Role of Blockchain Oracles in Web 3

Abstract

Blockchain networks often require data to and from the outside world, especially when offering services such as in the financial domain. Blockchain oracles are critical infrastructure layers that bridge the blockchain network so that smart contracts get rich data to process transactions or execute business logic. Blockchain oracles are classified into various types depending on the data facility offered. Some popular oracle networks include chainlink, brand protocol, and provable. This chapter explains how oracles work, such as fetching and delivering data, data verification and aggregation, and reward mechanisms. It also briefly discusses on their applications, such as price feeds for DeFi applications, event triggers used in insurance and gambling contracts, identity/reputation management for NFTs, and aggregating of IoT sensor data. Security and decentralization are discussed. The chapter ends with a discussion of future research trends and the integration of artificial intelligence and machine learning, event-driven architectures, and recent advancements.