Oracles

Quick take - Oracles, Nodes & DONs

Oracles are the entities that connect blockchains to real-world data and existing systems, and provide critical infrastructure for establishing a unified, interoperable Web3 ecosystem. Oracles form a decentralized off-chain network that coordinates tasks by consensus.

In depth

ORACLES

"Oracles are not the source of information—they’re an entity that queries, verifies, and authenticates external data sources, then relays that information back to a smart contract."

The core purpose of oracles is to derive truth about the validity of off-chain data, events, or computation and then relay the results on-chain.

“A blockchain oracle is secure middleware that facilitates communication between blockchains and any off-chain system, including data providers, web APIs, enterprise backends, cloud providers, IoT devices, e-signatures, payment systems, other blockchains, and more.” - (Source: What is the Blockchain Oracle Problem? (https://blog.chain.link/what-is-the-blockchain-oracle-problem/))

Oracles maintain a critical role in crypto infrastructure as a means of connecting smart contracts to off-chain data

" The true power of well-designed oracles is that they can generate definitive truth about external state in a tamper-proof and automated way and be customized according to users’ own trust assumptions, performance requirements, and budgets."

Oracles are the entities that connect blockchains to real-world data and existing systems, and provide critical infrastructure for establishing a unified, interoperable Web3 ecosystem.

Chainlink oracle networks not only feed financial market data on-chain to power DeFi applications, but they also provide a wide range of secure off-chain computations such as verifiable randomness and decentralized execution to enable dynamic NFTs and highly automated dApps. Moreover, with the development of the Cross-Chain Interoperability Protocol (CCIP), oracle networks will help enable the fast-growing ecosystem of different blockchains and layer-2 scaling solutions to securely communicate with one another.

REVIEW Architecture of a generalized oracle network Definitive truth—each smart contract application defines exactly how they will derive truth from the external world and what falls outside of those bounds. The network is heterogeneous—oracles perform specific jobs for applications but don’t operate as a unified monolithic network with cross-dependencies. Services are diverse—a limitless number of oracle services are possible for users, with nodes varying in the number and quality of jobs performed and revenue earned. Node requirements vary—each job has different requirements, which nodes compete for by differentiating themselves via distinct infrastructure, data access, reputation, etc.

Decentralized oracle networks (DONs) incorporate the same concept as blockchains of redundant computation by a diverse group of entities to generate tamper-resistance, availability, and correctness of services.

Nodes are rewarded for honest work and punished for malicious activity directly or indirectly.

Users can configure oracle networks to suit their own trust assumptions. Users may differ in what they consider a trustworthy oracle network

The ultimate design of an Oracle Network will depend on variables like the intended use case, value at stake.

Oracles can receive an unbounded set of diverse requests for generating definitive truth about any real-world event, data point, or computation. Each oracle request has varying costs and rewards associated with servicing it, depending on the difficulty of verification and degree of certainty a user wants. Oracle requests can also span many different blockchains and may involve data and services behind private paywalls or legal barriers that only certain permissioned nodes can access.

Chainlink’s heterogeneous architecture opens up a variety of services for hybrid smart contracts like data delivery, data aggregation, data signing, off-chain computation, privacy generation, transaction automation, verifiable randomness, L2 validation, cross-chain communication, off-chain payments, and more.

REVIEW

• Chainlink employs a heterogeneous (consisting of different, distinguishable parts or elements) network design, where an unlimited number of nodes and DONs can perform a diverse set of jobs in parallel without cross-dependencies.

Timeline

Chainlink Oracle Resources

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Timeline

Date	Media	Author	Title

Educational

Date	Media	Author	Title
N/A	Official Docs	Chainlink	What Is a Blockchain Oracle?
Mar 22	Article	Chainlink	The Ultimate Guide to Blockchain Oracle Security
21 Oct 21	Video	Chainlink	What Is a Blockchain Oracle? Brief explainer video.
06 Jun 21	Article	HackerNoon	The Strengths and Weaknesses of DeFi Price Oracles
27 Nov 20	Article	Smart Content	Chainlink: Low-Level Infrastructure for Inter-Oracle Competition
06 Mar 20	Article	Chainlink	The Future of Oracles: Fireside Discussion with Ari Juels, IC3 Co-Director and Distinguished Cornell Computer Science Professor
06 Mar 20	Video	Chainlink	Fireside Chat with Ari Juels and Sergey Nazarov - Connected Smart Contracts San Francisco