In a previous post, I have shared about the decentralized oracles. Now this post is the second part of the decentralized Oracle I am going to share about the mechanism like how decentralized Oracle works and some features of this system.

How Decentralized Oracles Work:

Data Retrieval:

Mainly there are several sources from where it is retrieving the data. Some of the common sources are APIs, data feeds, websites, IoT devices, oracles' own nodes, or other decentralized data providers.

Data Verification:

Data verification is also important here because accuracy and integrity are important in the case of data verification. If data is not verified, then there will be problems with the accuracy and security of the data in the integration to the chain. Ensuring the reliability of external data sources is a significant challenge. Decentralized oracles must implement mechanisms to filter out erroneous data and maintain a high level of accuracy. The natural source provides a wide range of data and from those data, the required has to be filtered & verified otherwise there will be a very wide range of fake and miscellaneous data in the network and those should be filtered and verified.

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Consensus Mechanism:

Here the conscious mechanism is also different from the normal consensus mechanisms like delegated proof of stake or proof of work etc. To ensure data accuracy, decentralized oracles often employ consensus mechanisms among multiple independent nodes or data providers. These nodes collectively agree on the accuracy of the data before it's relayed to the blockchain.

Data Relay:

Once the data is verified and a consensus is reached, the oracle relays the data to the smart contract on the blockchain. Different blockchains may have different decentralized Oracle solutions. Operating decentralized oracles involves costs, including data retrieval, verification, and gas fees on the blockchain.

~ Regards,
VEIGO (Community Mod)

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