How Does an Oracle Feed External Data into an Immutable Smart Contract?
An oracle is a third-party service that securely fetches real-world data, like asset prices or weather conditions, and verifies it for use by a smart contract. Since blockchains cannot access external data natively, the oracle signs and broadcasts the data onto the chain.
The smart contract then reads this on-chain data to trigger its execution logic. This mechanism is vital for financial derivatives that depend on external market prices.
Glossar
External Data
Bridging ⎊ External Data refers to any off-chain information, such as asset prices, interest rates, or real-world event outcomes, that must be securely relayed onto a deterministic blockchain environment for smart contract execution.
Oracle Feed
Function ⎊ An oracle feed serves as the external data source that provides real-world information to smart contracts, enabling them to execute derivatives contracts based on current market conditions.
Immutable
Integrity ⎊ Immutable characteristics within cryptocurrency, options trading, and financial derivatives fundamentally address data veracity and tamper-resistance, crucial for trustless systems.
External Market
Influence ⎊ The dynamics of the external market exert significant pressure on crypto derivatives pricing, often through shifts in global regulatory sentiment or macroeconomic policy that affect risk appetite.
Oracle Data Delivery
Delivery ⎊ Oracle Data Delivery is the process of providing external information to a blockchain for use in smart contracts.