As the web3 tech adoption soars in the blockchain industry, there’s need for enthusiasts globally to be acquainted about the Use-Cases of Blockchain Oracles.
Recall that, the blockchain oracles basically assist developers in building hybrid smart contracts in which there exists a combination of on-chain code and off-chain infrastructure for supporting innovative DApp projects.
Below are the use cases of Blockchain Oracles:
Decentralized Finance (DeFi)
Decentralized Finance (DeFi) has become one of the hottest trends in the past few years span. The industry is growing in heaps and bounds and requires the best tools and resources to keep pace with its popularity.
Oracles play a significant role in supporting the DeFi cluster as they help the users to access financial data related to assets and markets easily. For instance, money markets dealing with virtual assets employ price oracles to ascertain the borrowing capacity of investors.
These oracles help to check if the position of investors is undercollateralized and pertains to liquidation. In addition, automated Market Makers use price oracles to concentrate liquidity at the prevailing market price to help enhance efficiency.
NFTs and Blockchain Gaming
With the help of oracles, smart contracts find their place in non-financial areas, such as NFTs and blockchain games. NFTs are highly dynamic and prone to changes with fluctuations in external events.
Further, compute oracles help create verifiable randomness that assigns randomized characteristics to NFTs. These oracles also play a role in choosing random winners in games or NFT drops. E-games use verifiable randomness to enhance engagement and unpredictability in their ecosystems.
Cross-chain oracles provide entities with a reliable blockchain-supported middleware solution. They help firms to integrate their backend channels with any blockchain easily. Oracles aid enterprises in creating support for smart contracts for their users without spending resources on developing a link with individual blockchains.
Insurance firms use input oracles for smart contract execution on their decentralized clusters. These oracles validate the happening of insurable events during the processing of claims, offering access to physical sensors, APIs on the web, and legal data. Output oracles facilitate claim payouts across other blockchain networks or traditional payment channels.
Hybrid contracts promote environmental sustainability by leveraging improved incentivizing for users involved in green initiatives. Oracles provide smart contracts with seamless access to environmental data using sensor readings, satellite imagery, and advanced technologies.
The smart contracts then offer rewards to individuals and firms supporting the idea of sustainable consumption. They are also extending support to new carbon credits to reduce the climate’s negative impact.
Different Types of Oracles
Software and Hardware Oracles: They collect data from online sources and wire it to the blockchain network. Online information comes from multiple sources like website portals, servers, etc. They are beneficial in providing information about supply chains to smart contracts in real-time. Its other vital areas are price charts, traffic information, etc. If smart contracts need to flow information from barcode scanners and e-sensors, they need hardware oracles. These oracles are best suited for food supply chain management.
Outbound and Inbound Oracles: The Inbound oracles employ outside resources to provide data to smart contracts, whereas outbound oracles send data built by the smart contract to the real world. An example of an outbound oracle will include a smart contract that gives an update whenever someone adds money to his/her virtual account. For an inbound oracle, one can consider a sensor sending updates to the smart contract as a good application.
Decentralized and Centralized Oracles: As the name suggests, centralized oracles and decentralized oracles differ based on authority and control. Where a particular entity controls centralized oracles, decentralized oracles have no such controlling power over them.
The governing body in centralized oracles is the only source of information, whereas there are multiple sources of data in decentralized oracles. As a result, centralized oracles are less effective. The data moved using decentralized oracles can be easily validated and trusted.
Contract-Specific Oracles: They work with single, smart contracts. Contract-specific oracles are less famous as they do not meet the requirements of the burgeoning blockchain industry. The efforts involved in their creation are pretty high compared to their usability, which is limited to a particular use case only.
Human Oracles: Humans can also work as oracles if they possess the necessary expertise in the field. These oracles are involved in research operations and testing of authenticity of data right before it is fed to the smart contracts. In addition, the use of cryptography helps to ensure that the data is accessed by the right person. Stay informed.
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