A decentralized oracle in smart contracts acts as a reliable source of external data or information. It serves as a bridge between the blockchain and the real world by validating and delivering data to the smart contract in a trustless manner.
Smart contracts are self-executing agreements that automatically execute predefined actions when certain conditions are met. However, they lack the capability to directly access data that exists outside the blockchain. This limitation makes it challenging for smart contracts to interact with real-world events, such as weather data, stock prices, or sports scores.
This is where a decentralized oracle comes in. It fetches data from various sources, such as APIs, IoT devices, and other off-chain platforms. The oracle then verifies and validates this data before providing it to the smart contract. By doing so, it ensures the accuracy, reliability, and integrity of the data that the smart contract relies upon.
The role of a decentralized oracle includes the following:
In summary, a decentralized oracle enables smart contracts to interact with external data, making them more versatile and capable of executing actions based on real-world conditions. It brings external information into the blockchain in a secure and reliable manner, expanding the potential use cases for smart contracts.