How Does an Oracle Feed Real-World Data into a Smart Contract?
Oracles are third-party services that connect smart contracts to external, real-world information, such as market prices, weather data, or event outcomes. They fetch, verify, and relay this data onto the blockchain in a cryptographically secure and tamper-resistant manner.
This external data is crucial for executing many smart contracts, especially those related to financial derivatives that depend on external price feeds. Without oracles, smart contracts are limited to data already on the blockchain.
Glossar
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.
Decentralized Oracle Network
Network ⎊ A Decentralized Oracle Network (DON) facilitates secure and verifiable data feeds from external sources to blockchain environments, crucial for smart contract functionality within cryptocurrency derivatives and options trading.
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.