What are Oracles and why blockchains need them
Oracles are an absolute necessity for the development of better and more useful blockchains and understanding their roles in the crypto universe and in the stock market can lead to a better understanding of where technology and finance are headed in the future.
As advanced blockchains use smart contracts (agreements on the blockchain that only execute if certain conditions are met), the role of oracles is quickly becoming more and more important, but can they take the stock market to a whole new level?
Understand how smart contracts work
Smart contracts have gone from simple lines of code saying, for example, “if user 1 gives user 2 10 X tokens, then user 2 will in turn give user 1 5 Y tokens”, to now requiring for certain real-world, real-life conditions and events to be verified and reported, meaning they have finally “broken” into the real world.
As an example of this, theoretically you can now write insurance contracts where a user commits to pay a monthly premium, and in the event of a flood, house fire and so on, the smart contract will pay him or her a specified amount. Or a farmer can do the same as means to protect his crops.
The question you’re probably asking is obvious: how would a blockchain know if a house burned to the ground or a farmer lost his crops?
Enter the Oracles: What is an oracle and what do oracles do in crypto?
An oracle is a trusted third party that feeds the blockchain or smart contracts with trusted data outside of the information it can access.
Since a blockchain is only programmed to store data and transactions, it is unable to “see” outside its own code, as such it is simply not possible for it to query an online search engine, request more information , and to verify the authenticity and veracity of the results.
As such, smart contracts can be written in such a way that they rely on trusted third parties with said processes (Oracles).
An important clarification needs to be made here: oracles are usually code that users trust and not a real physical oracle.
What do Oracles mean for the stock market?
An oracle can be programmed to return a myriad of information, including stock prices.
As such, it is not a very big step from here to create a price oracle, i.e. a synthetic token that follows the price of a share.
This means that price data can easily be streamed straight into the blockchain, and by doing so, investors from all over the world can invest in stocks without having to present social security numbers, report taxes and so on.
It would basically act as a mirror protocol like the M-GOOG token, a token that was designed to accurately mirror the price of the real Google stock.
Ends
It may not be too long before we finally see a fully decentralized exchange on a blockchain.
Many projects out there claim that they will be the finance of the future, but the question that matters most remains: who will ultimately do it?
Oracles are an absolute necessity for the development of better and more useful blockchains and understanding their roles in the crypto universe and in the stock market can lead to a better understanding of where technology and finance are headed in the future.
As advanced blockchains use smart contracts (agreements on the blockchain that only execute if certain conditions are met), the role of oracles is quickly becoming more and more important, but can they take the stock market to a whole new level?
Understand how smart contracts work
Smart contracts have gone from simple lines of code saying, for example, “if user 1 gives user 2 10 X tokens, then user 2 will in turn give user 1 5 Y tokens”, to now requiring for certain real-world, real-life conditions and events to be verified and reported, meaning they have finally “broken” into the real world.
As an example of this, theoretically you can now write insurance contracts where a user commits to pay a monthly premium, and in the event of a flood, house fire and so on, the smart contract will pay him or her a specified amount. Or a farmer can do the same as means to protect his crops.
The question you’re probably asking is obvious: how would a blockchain know if a house burned to the ground or a farmer lost his crops?
Enter the Oracles: What is an oracle and what do oracles do in crypto?
An oracle is a trusted third party that feeds the blockchain or smart contracts with trusted data outside of the information it can access.
Since a blockchain is only programmed to store data and transactions, it is unable to “see” outside its own code, as such it is simply not possible for it to query an online search engine, request more information , and to verify the authenticity and veracity of the results.
As such, smart contracts can be written in such a way that they rely on trusted third parties with said processes (Oracles).
An important clarification needs to be made here: oracles are usually code that users trust and not a real physical oracle.
What do Oracles mean for the stock market?
An oracle can be programmed to return a myriad of information, including stock prices.
As such, it is not a very big step from here to create a price oracle, i.e. a synthetic token that follows the price of a stock.
This means that price data can easily be streamed straight into the blockchain, and by doing so, investors from all over the world can invest in stocks without having to present social security numbers, report taxes and so on.
It will basically act as a mirror protocol like the M-GOOG token, a token that was developed to accurately mirror the price of the real Google stock.
Ends
It may not be too long before we finally see a fully decentralized exchange on a blockchain.
Many projects out there claim that they will be the finance of the future, but the question that matters most remains: who will ultimately do it?
