Decentralized Oracle Networks

Decentralized oracle networks have changed the whole blockchain system with its features and functionalities. Decentralized oracle networks give reliable, secure and decentralized data to smart contracts. This data is also given to decentralized applications. Decentralized oracle networks use distributed consensus mechanisms. And they ensure trusted and efficient data delivery.

^{Made with Canva}

Basic Understanding of Decentralized Oracle Networks

Decentralized oracle networks consist of a network of nodes or validators. These nodes individually source, validate and transmit external data to blockchain based applications. These networks are based on decentralization and transparency. They offer auditable data sources without having a single point of failure or control.

Working of Decentralized Oracle Networks

1. Data Sourcing: In the decentralized oracle network the validators get information from different external sources. These sources include APIs and IoT devices. These sources provide financial market prices and weather conditions.

2. Data Validation: The independent validation of the data ensures the trustworthiness and correctness. Different techniques are used for the data validation such as the consensus mechanisms and cryptographic methods. Any consensus algorithm can be used such as proof of stake, proof of authority or delegated proof of stake. It depends on the specific structure and requirements of the network with time.

3. On Chain Transmission: Once validated, this data is then transmitted to the blockchain in the decentralized oracle networks. The data is transferred to the smart contracts as well as decentralized applications. And these can access the data easily.

4. Smart Contract Execution in Decentralized Oracle Networks: Smart contracts use the received data to predefine the actions or conditions of execution in the decentralized oracle networks. For instance, a payment can be executed via a smart contract while other examples include interest rate adjustments and initiation of supply chain events from decentralized oracle networks’ authenticated data.

Benefits of Decentralized Oracle Networks

^{Image by Gordon Johnson from Pixabay}

1. Decentralization: Decentralized Oracle Networks remove any central points of failure. It increases the security of the blockchain based applications.

2. Reliability: Diverse consensus mechanisms and distributed consensus in decentralized oracle networks provides secure and reliable data sources against data tampering and censorship.

3. Transparency: Stakeholders have the ability to verify the accuracy of their data sources with respect to retrieving, validating or transmitting these data remotely using decentralised oracle networks.

Applications of Decentralized Oracle Networks

1. Decentralized Finance (DeFi): Decentralized Oracle Networks play a role in the decentralized finance applications. They automate trading, lending, borrowing and derivative contracts.

2. Supply Chain Management: Product genuineness is verified by decentralised oracle networks as well as shipment status tracking in supply chains. It is also used to monitor inventory status all the times.

3. Insurance: Decentralized oracle networks facilitate insurance smart contracts by providing real time data patterns, natural disasters and asset valuations data that allow for risk assessment, premium calculation as well as claims processing.

4. Gaming and Betting: Decentralized oracle networks avail game scores, match results and event outcomes in real time to decentralized gaming and betting platforms thus ensuring fair game play and payouts that are transparent.

Conclusion

Decentralized oracle networks are the base for blockchain innovation. They make it easy for real world data to be integrated into smart contracts. They also help in the integration of data to th decentralized applications. Decentralized oracle networks provides new facilities and opportunities in the blockchain based applications. It revolutionize the decentralized finance, supply chain management, insurance and gaming ecosystems. This decentralization provides transparency. It empowers the blockchain ecosystems. Decentralized oracle networks also facilitates the e-commerce systems. Decentralized oracle networks are becoming significant because of their easy use and automated work.