What Is a Blockchain Oracle?

Oracle services are used to ensure only accurate data is being used on decentralised finance (DeFi) applications based on specific blockchains.To understand Binance Oracle, one must first understand what a blockchain oracle is. Blockchain oracles are services that allow smart contracts to access data from sources that can be found outside their native networks. In other words, an oracle is a bridge between the blockchain and the real world. These services can help smart contracts access outside data and execute based on off-chain inputs.

The data could be virtually anything, from price information to weather reports. Oracles can also be bi-directional, meaning that users can both receive data from the outside and send data out in the opposite direction. Keep in mind that an oracle is merely a channel for data to travel rather than a data source itself.

Binance Oracle Components

Binance has launched its native oracle service in a bid to simplify the process of loading already existing data on its native BNB blockchain. This will enable smart contracts on the blockchain to run on real-world inputs and outputs. Blockchains in themselves cannot verify the authenticity of the data loaded on them. Hence, oracle services are used to make sure that only accurate data is being used on decentralised finance (DeFi) applications based on specific blockchains. Oracles can also be bi-directional, allowing them to ‘send' data to the outside world.

“Blockchain oracles are a critical building block of the blockchain ecosystem. Without them, smart contracts would have no way to obtain any real-world data. Binance Oracle is a blockchain oracle that enables smart contracts to access data sources in the real world required by blockchain applications. It ensures that smart contracts have the correct data at the right time,” the US-based crypto exchange said in an official post.

When a blockchain is integrated to an oracle service, the smart contracts on the blockchain get more finetuned to identify and respond to external events with specified actions.

The oracle analyses data sources, data processing and signing, data publishing, and data monitoring to ensure that the data wired onto the blockchain is accurate, timely, and tamper-proof.

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