The introduction of blockchain technology has had a significant positive impact on increased trust, security, transparency, and the traceability of data shared across a business network. Even though there is still much work to be done in terms of adoption and general acceptance, blockchain technology is already being used in a variety of industries. 

The development of smart contracts by Vitalik Buterin enabled the use of blockchain technology in industries other than finance. Smart contracts are predefined codes or rules that are set on the blockchain and only executed when certain conditions are met. 

The use of smart contracts in voting systems, supply chain management, entertainment, and healthcare records are just a few of the industries where blockchain technology has been implemented. 

However, one of the major issues impeding the growth and adoption of blockchain technology is interoperability. Hence, the need for blockchain oracles.

Blockchain Oracles: What Are They?

Blockchain oracles are third-party services that connect smart contracts with the outside world, primarily to feed information in from the world, but also the reverse. Information from the world encapsulates multiple sources so that decentralized knowledge is obtained.

In an age where there is so much data available, it's difficult to know what information is reliable and what isn't. For example, if you're looking for a restaurant recommendation in a new city, you may find conflicting information about which restaurants are best in your area. Some people will tell you that one particular restaurant is good, while others will tell you that another one is better. In this case, it's important for users to be able to trust their recommendations without having to investigate every single source themselves.

The same goes for other kinds of data as well—for example, if someone wants to buy something online but doesn't know how trustworthy their seller is or how reliable their product is going to be once they receive it, they won't feel comfortable buying from them.

This can lead customers away from making purchases altogether because they don't feel safe enough doing so online anymore—which means less money coming in for sellers who rely on these types of sales! The main goal of a blockchain oracle is to reduce trust between parties and to increase reliability by providing transparency and immutability.

The Need For Blockchain Oracles 

The lack of interoperability between blockchain smart contracts means that blockchain networks do not connect to or collect data from sources outside the blockchain. This system is one of the foundations of blockchain technology, as it restricts the use of data from outside sources to maintain the technology's decentralization. 

This results in a limited flow of information and significantly impedes the advancement of blockchain technology.

Consider the following scenario: 

Two people place a bet on which team will win the Champions League final, and the funds are locked in a smart contract. The smart contract has been programmed to only release funds to the candidate who has placed the correct bet. However, for this smart contract to work, it must first obtain accurate information about the Champions League final scores. As a result, data must be gathered from an external source or API. 

This is where blockchain oracles enter the picture. A blockchain oracle acts as a trusted third party, connecting on-chain and off-chain data, in this case, collecting data about the Champions League tournament results and relaying that information to the blockchain smart contract. 

Oracles are critical components of the blockchain ecosystem because they expand the number of smart contracts that can be used. Without blockchain oracles, smart contracts would only be able to access data from within their networks, which would severely limit their functionality.

Types of Blockchain Oracles 

Blockchain oracles are classified based on 

  • Source – does the data originate from software or hardware?
  • Direction of information – is it inbound or outbound?
  • Trust – is it centralized or decentralized?

A single oracle can fall into multiple categories. For example, an oracle that sources information from a company website is a centralized inbound software oracle. Read the Classification of Blockchain Oracles to learn more.


The world of decentralized knowledge is growing, and there are many ways to connect your smart contracts with this world. One of the most effective ways is by using blockchain oracles to help you obtain information from the outside world. Blockchain oracles can help you get data from multiple sources, allowing you to make more informed decisions about your smart contract's actions.