Steemit Crypto Academy Contest / S8W4 - Blockchain Oracles.

Greetings dear friends,
Welcome to my blog today. This is my entry number 4 in this week's engagement challenge and I'm delighted to present my entry. In this week's contest, we will be discussing a technology that is used by many but without knowing how it functions.

Blockchain Oracles are a new form of technology that is playing a vital role in the phase of blockchain and smart contracts. In this contest, I will be explaining in very simple terms what blockchain oracle is all about. I do hope you will enjoy reading my blog today. Without further ado, let's get started.

The word Oracle serves as a mediator between two different persons from entirely different parts. In our world today, we have both the physical and the spiritual worlds, it is the duty of the oracle to serve as a mediator between the physical and the spiritual. Since those from the physical can not go to the spiritual and come back or those from the spiritual to go to the physical and also come back, there is a need for a mediator that will help transmit the messages between both relm.

As it is with the life example I have given above, so also it is in the real and virtual world. We know that one of the most trending technology today is blockchain technology hence the problem of transmitting information from the real world into the virtual world also arise which gave room for the birth of the blockchain oracle.

Blockchain Oracle is a medium through which real-life information is transmitted from the outside world to the smart contract and blockchain for effective use of real-time data. This means that a blockchain oracle serves as a link between the off-chain (real life) and the on-chain (virtual world).

The function of the blockchain oracle can never be overemphasized because it has gone a long way to fetch data from off-chain to on-chain or verse visa. This blockchain oracle can be in form of software or hardware components, its main activity is to get establish a link of communication between the real world and the virtual world.

Let's take an illustration to explain more clearly how a blockchain oracle works. Today, we see a lot of people betting on games such as football, basketball, wrestling, etc. This bet can be done between two people. Let's say John and Simon all came out to bet on a football game.

The match is between Chelsea and Manchester United. John and Simon bet $5 each which implies that the winner will return home with $10. John said Chelsea will win whereas Simon said Manchester United will win. When this bet is placed, the information we have agreed on in the outside world is the selections and the teams we have chosen, this data will be fed to the system via the blockchain oracle.

After the game ends, a winner will emerge, and from that winner, the price of the bet will be given to the person whose prediction meets the requirement I.e matched the winner. This shows clearly how the blockchain oracle works as it has Cotton information from the outside world and used it in the virtual world.

There are different types of blockchain oracles. Since getting information for the blockchain requires every means possible, it is important to also have several means to get off-chain data and link it with the on-chain for maximum output. The few types of Oracle I will be discussing in this post are;

As the name implies software, this is a type of oracle that uses written programs to get information from the external body (I.e other websites) and then transmit it to the blockchain for usage. This data can be generated from a website using the software oracle or from a pdf file.

As the name implies hardware, this is a type of Oracle that uses physical devices such as sensors to get information from an off-chain and then transmit it directly to the blockchain for effective usage. When data is captured by the hardware Oracle, it is converted and sent to the blockchain in a language the blockchain understands.

In the centralized oracle, just like a centralized exchange platform, data is controlled by a single point. It means that every piece of information gotten by this oracle is coming from a single source which makes it riskier and less reliable. It means if there is a bridge on this single point, no information can be sent to the blockchain.

This is the direct opposite of the centralized oracle as it has multiple ways in which information is been fed to the blockchain hence the information sent here is more reliable and secure. If one point of information fails, the other means of transmission will continue functioning. Here since information is coming from different sources, you get more reliable information as compared to the centralized.

Here, unlike another oracle that sends and receives data from the blockchain, the work here is split. This type of Oracle only sends data from the outside world to the blockchain I.e it gets real-life data and fed it to the blockchain for maximum usage but doesn't get information out from the blockchain.

The direct opposite of the Inbound oracle is the outbound oracle. Here this type of oracle only receives information from the virtual world I.e from on-chain to off-chain it doesn't send data it only receives from on-chain to off-chain. So this brings out day from blockchain technology to the real world.

As the name implies, bidirectional means both sides. This type of oracle works on both sides I.e it can send and receive information from the blockchain into the real world and verse versa.

I have already briefly explained this above but for the sake of this question, I will be going more in-depth into what decentralized oracle is all about. As I have said earlier, the decentralized oracle is different from the centralized oracle because just like the decentralized exchange, there is no single point of control in it hence power is not centered in a particular place instead, different nodes are connected all over the world to bring in data.

With a decentralized oracle, blockchain technology is considered to be more reliable because the information is transmitted and verified by multiple nodes to check its authentication.

Checking the information authentication involves ensuring that the information is valid for use. The agreement comes when more nodes have verified the information and find it worthy enough for usage. This is not the same in the case of the centralized as it is only been verified by a single node.

Another thing is that the decentralized oracle works with smart contracts which means that certain conditions have to be met before approving any given information. This makes the information more valuable and reliable.

With the few points stated above, you will agree with me that a decentralized oracle is far better than a centralized oracle though it may maybe higher in cost when it comes to more accuracy, reliability, functionalities, etc, it is what everyone should go for.

The use case of decentralized oracle is numerous. For the sake of this task, I will be discussing a few which I have studied during the periods of my research.

One of the major use cases of the decentralized oracle is solving the problem between the communication of two different blockchains. Before this time, the transfer of data from one blockchain to another is usually a very big issue as they are built on different protocols hence communicating together is unusually difficult.

With the decentralized oracle, both blockchains can now communicate effectively by sharing their data without any problem at all. So one of the major use cases is this cross-chain service provided.

Another use case of the decentralized oracle can be seen in insurance. Insurance lack trust and transparency hence it is the duty of the decentralized oracle here to get all information of both parties and then analyze and bring them to the limelight where both parties can see the information of each other. This has promoted trust and transparency in the insurance firm.

Another place where the decentralized oracle works the more is in decentralized finance, this is because information on the market and assets are needed to calculate effectively the borrowing capacity of a customer and the collateral that the customer is holding if it's worth what he/she wishes to borrow. All this information is gathered together and then processed via the smart contract which majorly uses the "if else" statement.

This is another use case of the decentralized oracle. Here in the Non-Fungible Tokens (NFT), the work of the oracle is to generate NFT randomly and distribute it randomly this oracle process helps to change the appearance of the NFT and its value as more people get interested in it. Since this process is randomly done, a winner who mers the criteria is selected via a smart contract.

The essence of blockchain oracle in our world today can not be over emphasised. We have seen how it has helped to bridge the gap of communications between block chains and between the real world and the virtual world. It has also help to foster transparency and made date more reliable as we can communicate from the real world to the virtual word without any problem. Having blockchain oracle in place in different areas of life will ensure more satisfactory work for all.

I want to finally invite a few friends of mine to also share their via of the blockchain oracle if they have not done that. I call on @fjjrg, @graceleon, @jueco, @bambuka, @inspiracion, @lavanyalakshman and @msharif to join the contest.