Define ‘Decentralized Oracle’ in the Context of Smart Contracts.
A decentralized oracle is a third-party service that provides smart contracts with external, real-world data, such as asset prices, weather, or event outcomes. It is 'decentralized' because it uses multiple independent data sources and validators to ensure data integrity and prevent a single point of failure.
Oracles are essential for executing derivatives contracts that rely on off-chain information.
Glossar
Derivatives Contracts
Valuation ⎊ Derivatives contracts, within cryptocurrency, options trading, and broader financial derivatives, represent agreements whose value is derived from an underlying asset or benchmark.
Smart Contracts
Function ⎊ Smart contracts are self-executing agreements with the terms of the agreement directly written into lines of code, residing on a decentralized ledger.
Oracle Latency
Propagation ⎊ Oracle latency, within cryptocurrency and derivatives, represents the time delay inherent in transmitting data from a real-world source to a blockchain or decentralized application.
Decentralized Oracle
Attestation ⎊ Decentralized oracles fundamentally address the challenge of bridging off-chain data to on-chain smart contracts, providing a verifiable source of truth for derivative pricing and settlement.
Multiple Independent Data Sources
Verification ⎊ Multiple Independent Data Sources, within cryptocurrency, options, and derivatives, represent a critical component of robust risk management and informed trading decisions, mitigating single points of failure inherent in relying on a solitary information stream.
Data Integrity
Provenance ⎊ Data integrity within cryptocurrency, options trading, and financial derivatives fundamentally relies on establishing an immutable provenance for each transaction and data point.