An Oracle Network is a decentralized infrastructure comprising multiple data providers that securely and verifiably deliver external, real-world information to blockchain-based smart contracts. It bridges the inherent data isolation of blockchains with off-chain data sources. Its purpose is to enable smart contracts to react to real-world events.
Mechanism
Oracles gather data from various off-chain APIs, web sources, or enterprise systems. This data is then cryptographically signed by multiple independent oracle nodes and aggregated to ensure accuracy and censorship resistance before being transmitted to the blockchain. This process establishes data integrity for on-chain consumption.
Methodology
Oracle networks are fundamental for enabling complex decentralized applications, particularly in decentralized finance (DeFi), by allowing smart contracts to access and act upon external market prices, event outcomes, or other data feeds. Their robust design, often incorporating economic incentives for honest data provision, ensures reliable and tamper-proof information for blockchain protocols.
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