The Endless Potential of Blockchain Oracles

Blockchain oracles continue to drive innovation in new and exciting ways. Oracles are third-party data monitoring protocols or hardware that provide blockchain networks access to external information. Oracles allow blockchains to be more responsive and agile to the conditions of their environment. As such, oracles are now one of the most exciting areas of blockchain development. 

Before the invention of Oracles, the blockchain and the real-world were disconnected. Smart contracts were unable to monitor real-world data in a reliable manner. This inability to access outside parameters limited the capabilities of blockchain networks greatly.

Crucially, oracles are the missing link between blockchain activities and outside parameters. In this way, any relevant data gathered from outside the blockchain can trigger smart contracts. These sensors increase the effectiveness and responsiveness of blockchains. Particularly, smart contract capabilities receive a huge boost from this upending tech. Luckily, thanks to increased adoption, oracles are now at the forefront of blockchain development. 

Oracles and Nodes

In technical terms, data sent from the oracle goes straight to the nodes. Here, the nodes complete a couple of core functions. These functions include the verification and authentication of the data received. 

Not the Data – Blockchain Oracles

Notably, Oracles are not actual data. Instead, oracles come in the form of condition monitoring sensors.  These conditions can fall into nearly any real-world use scenario. For example, you could set an oracle to trigger a smart contract if a particular candidate wins the presidential election or if your favorite football team wins the championship. The possibilities are endless.

Oracles can provide a plethora of previously unavailable data to the network in real-time. This data commonly includes price information, the status of a payment, or even the sensor’s temperature. Oracles function like most smart contracts on the back-end. Users must request their service to initiate their processes. 

2-way oracles

Recently, two-way oracles have become more popular. This type of oracle can both send and receive data from the blockchain. In this way, oracles now place the security of the blockchain directly into the real world.

Different Types of Blockchain Oracles

There are three main classes of oracles in existence today. Each oracle type features unique characteristics, capabilities, and initiation qualities present during its development. Additionally, an oracle can fall into multiple categories depending on its functionality. Here are the three main classifications of oracles:


The first type of oracle receives its data directly from a software protocol or piece of hardware. Software Oracles are the most common type of blockchain oracles in use today. They are easy to set up, and they provide a user with the ability to interact with online information sources. This data can originate from databases, websites, or servers.

  • Hardware Oracles

Hardware oracles gather their information from external sensors set up to monitor real-world conditions. These sensors can include electronic monitoring devices, bar code scanners, and any other sensor to capture off-chain data.

Direction of Information

The next way to classify an oracle is to look at its information flow. Does the oracle receive data from the blockchain, or does it send data to the network? Depending on its functionality, it may do both.

  • Inbound Oracle

Inbound oracles transmit their data back to the blockchain to initiate a smart contract. This data can include nearly anything. To date, oracles exist that monitor temperature, weather, stock prices, sports scores, and GPS data. 

  • Outbound Oracle

Outbound oracles send data from the blockchain back out to the real world. This data is usually in the form of a protocol. A perfect example of this style of oracle can be found in smart locks. Smart locks are predetermined account lockup periods. They are associated with security token offerings and are required in many jurisdictions.


Another categorization trait one can employ to determine the class of an oracle is its level of trust. Is the oracle a decentralized protocol, or does it depend on a centralized source of data? 

  • Centralized Oracles

Centralized oracles receive their information from a single entity. This information must be correct for the smart contract to initiate as planned. Consequently, centralized nodes create data reference concerns. 

  • Decentralized Oracles

In general, decentralized nodes are more reliable because they don’t depend solely on a centralized source of information. Much like a blockchain, decentralized oracles rely on a network of oracles to confirm the data before its sent to the network.

  • Human Oracles

There have been occasions where people acted as oracles to a blockchain network. Whenever you introduce a high-level specialist into the equation, this is the case to verify and relate outside data to the blockchain. In these cases, a blockchain identity verification protocol eliminates the chance of impersonators fouling the data.

Oracles See the Future

Given their ever-growing role within the crypto space, it’s hard to imagine a future where blockchain oracles don’t take center stage. The ability to add trustless characteristics to off-chain transactions is a game-changer. 

Bitcoin live price
price change

You can expect to hear more about these exciting off-chain devices as their advantages become public knowledge. For now, you don’t need to consult an oracle to see that these blockchain instruments have a bright future ahead.

Stay up to date with our latest articles

More posts

Intel’s Blockscale – A New Bitcoin Mining Chip

Earlier this month, Intel announced Blocksale ASIC, the company's second-generation Bitcoin mining chip. Intel plans to deliver the new chip for the third quarter, which it claims will be more energy-efficient. What does this news mean for Intel and the blockchain sector? How will Bitcoin miners react? Intel’s Second Attempt to Attract Crypto Miners Intel's first mining chip, named Bonanza Mine, is a 7nm process packed in lots of 300. We can speak of a 3,600W mining machine with up…

SegWit2x – What is It and How Does It Work?

SegWit2x (“B2X” or “S2X”) was a failed controversial Bitcoin hard fork effort aimed to double the block size limit. Some people in the BTC community went as far as to label this proposal as a “Corporate Takeover”. Over 80% of miners supported SegWit2x, but the community could not agree on the upgrade. There are several things we can all learn from this story, as we will explain in the article. The difference between a “Soft Fork” and a “Hard Fork”…

SegWit (Segregated Witness) – What Is It and How Does It Work?

From Satoshi Nakamoto's historic whitepaper to modern times, the world of cryptocurrencies has changed a lot. This sector has brought about a real revolution in the world economy in just under ten years. Not everyone knows that the algorithm created following Nakamoto's paper has undergone several changes over time. This software (known as "Bitcoin Core") has shown more rigidity than many modern blockchains. For this reason, analyzing one of its significant changes over time is an exciting aspect. Therefore, this…

What Is a Bitcoin Node? A Guide for Beginners

How to evaluate the security of a cryptocurrency? One could easily claim that secure cryptos need to run on a secure blockchain. However, this theoretical statement can have complex applications in the real world. One way to look at the matter is by connecting security to validation. Every blockchain must have a suitable transaction validation mechanism. When it comes to blockchain validation, we generally mention nodes. Today we will talk about Bitcoin nodes. The article aims to explain a very…

Where Can You Pay Taxes With Bitcoin?

Short-term Bitcoin traders have an acute interest in how they can dodge paying taxes on their Bitcoin, especially on capital gains. Others see it as a tool for evading taxation altogether, including income tax. These strategies are usually quite difficult in practice and therefore NOT recommended. However, a more interesting question – relevant to law-abiders and long-term HODLers – is how we can use our Bitcoin to help pay our taxes. Directly. This prospect is essential for people who store…

The Story Of Bitcoin And Ethereum’s Reversed Blockchains

Decentralization is the primary selling point of the three worlds of Bitcoin, crypto, and the web. There are several reasons for this. Some are related to the increased transactional efficiency that decentralization can provide. Others are related to creating permissionless, censorship-resistant digital networks. The most important is that decentralization weakens any single-point-of-failure, hence bolstering network security. This not only keeps a network as close to unbiased and ‘neutral’ as possible but almost guarantees its immutability. Yet the crypto world hasn’t…

What Is A Bitcoin ETF?

On October 19th, 2021, the first Bitcoin US Bitcoin ETF launched on the New York Stock Exchange. This was a long-awaited event for the crypto community, which viewed it as a significant milestone for the industry. The debut was hyper-successful, too. Within just a day, the ETF generated over $800 million in trading volume. It was the second most lucrative stock market debut ever on the NYSE, behind Black Rock’s carbon fund. Why the enthusiasm? What is a Bitcoin ETF,…

Is It Safe to Use Bitcoin Blockchain?

New Bitcoin investors often worry about how safe this technology is. And, since buying BTC could be expensive nowadays, they are not wrong to enquire about crypto safety. After all, their assets are on the line if something goes wrong with the blockchain. Bitcoin is one of the most popular digital forms of money on the planet. It has been around since 2009. For the past 10 years, this virtual currency has demonstrated to be exceptionally strong in ensuring data security.…

Should I Keep My Bitcoin On An Exchange Or In A Wallet?

Cryptocurrency has taken the world by storm. Today, it is unlikely that someone using the internet hasn't at least heard about Bitcoin even once. Such is the popularity of cryptocurrency that many companies and brands accept it as a form of payment. Additionally, dozens of crypto exchanges allow you to buy any cryptocurrency with fiat money. Buying cryptocurrency has become incredibly more accessible, and you can even find guides and articles on how to do so. However, most Bitcoin owners…

What Are the Major Differences between Blockchain and Bitcoin?

Over the years, cryptocurrencies have been a hot topic all around the world. Also, many people invested heavily in digital assets and generated millions of dollars in return. As a result, the crypto industry has developed into a trillion-dollar market. Nevertheless, many people still hesitate to enter the crypto space due to its many confusing terms. For instance, some don't know the differences between blockchain and Bitcoin. And, who can blame them? Bitcoin is a cryptocurrency but also a blockchain.…