Blockchain Vocabulary - Oracles (26/30)

Oracles provide the data connection between blockchain applications and the outside world.

If you place a bet on an NBA game using a smart contract, the oracle allows for the smart contract to know who won the game. It can execute its logic and pay out the winner.

Oracles are not the data source itself; they are a necessary layer in the middle that queries and authenticates data from different sources so it can then be relayed to the blockchain application.

Oracles can fall into different categories: 1) hardware or software, 2) input or output, 3) third-party or first-party, and 4) centralized or decentralized.

Most similar to API connectors between applications and even within an application, oracles are necessary to ensure data accuracy, availability, and verification to expand the real-world use cases of blockchain applications.

Further reading: https://ethereum.org/en/developers/docs/oracles/