Ethereum-based Smart Contracts are simple but are very effective forms of code that is designed to provide services or goods in exchange for certain values that can be monetary or time-based being fulfilled. as they are completely based on the Ethereum network, the information provided will be limited in order to not overwhelm the lightweight nature of the Blockchain. Smart Contracts is like a judge which requires a solid and reliable source of information to make correct and proper judgments. In order to overcome this, the Oracles are introduced.


Oracles are trusted data feeds that send information into the smart contracts by removing the need for Smart Contracts to directly access the information outside their network by lightening their workload. Oracles can be supplied by the third parties and are authorized by the companies that use them.

Critics will highlight the irony of using third parties to solves an issue on a decentralized platform that boasts of reducing the need for such intermediaries. Here, Oracles are the necessary step forward in the practical utilization of the Smart Contracts and for the utilization of real-world data in Smart Contracts requires reliable Oracles.

The issue of transferring information through Oracles is a subject of much debate among Smart Contract users and developers. In businesses like, simple service retail or travel services, Oracles handle the task well by supplying yet crucial information to Smart Contracts that can decide what to do afterward. For instance, a Smart Contract being fed information by a trusted bank’s API and delivering the promised or said amount to the user, which seems very simple.

In case of more complex tasks like, renting properties or providing entertainment services, Oracles have to recognized and send a multitude of data feeds and various types of information which becomes more complicated with the physical items,

for example: renting a car. Car rentals must evaluate if everything is in working order, but there are many parts to an automobile which requires a large number of data feeds that are sending information into the Smart Contracts and thereby sending them onto the Blockchain.

There can be many ways to counteract which involves the use of multiple data feeds and these are also employed for simpler types of the information which carries the greater weight that is by necessitating more caution and precision in analyzing the information provided to the Smart Contracts. If in case each type of information not only requires several data feeds but there are multiple types of information provided for multiplying the amount of information an Oracle needs to push onto the blockchain.

The main problem of the centralization and the decentralization is at the crux(the decisive or most important point at issue) of the Smart Contract and Oracle debate. As the Smart Contracts and the Blockchain are in essence decentralized while Oracles are not decentralized, so it not only provides a philosophical obstacle but it also provides a practical hindrance for widespread utilization of Oracles

LINK is used in attempting to smooth out this main problem by creating the world’s first truly decentralized Oracle Network by allowing Smart Contracts to securely connect to off-chain (real) feeds such as API or the widely-accepted payment systems.

Example: SmartContract, its a company name with the concept of smart contracts is launching phase one of its long-term project that seeks to connect the back-office Swift systems of the banks to Smart Contracts, for essentially becoming an Oracle between banks and Blockchain Smart Contracts.

One more service seeking to connect the “wallet gardens” of Smart Contracts with the wider world is Oracle, a London-based fintech company that has a vision of creating a versatile and reliable connection between web API and Dapps.

Be Ethereum is a decentralized, social-betting platform based on Ethereum technology and Smart Contracts, and is a sports betting platform where Smart Contracts will depend on an Oracle that will use a multitude of official and trusted sports feeds to evaluate results and reward winnings. Mainly Bethereum is about social betting, where players bet against each other instead of betting against the house, Smart Contracts will also govern the entire betting process between the included players.

Smart Contracts have a tremendous potential for business and will be a defining feature of the Blockchain in the future. this potential needs to be unlocked by developing and utilizing well-designed Oracles to connect the Blockchain with the “real” i.e, the off-chain world. The advent of Oracles and the power of already robust Blockchain and Smart Contract technologies.


Smart contracts running on blockchain networks have a significant potential to increase efficiencies and reduce transactional costs across an array of industries. Smart contracts effectively minimize counterparty risk and provide transparency, but still, it faces several limitations to their capacity.

The growing need for external data flowing into blockchains and, by extension, smart contracts has led them to the debates and innovation around Oracles. Oracles are data feeds from external systems that feed vital information into blockchains that the smart contracts may need to execute under specific conditions. The growing need for oracles represents the continued expansion of blockchain systems into practical and real-world use cases, where accurate data is crucial.

Oracles represent third-party feeds which require a permit from the external devices/entities. Hence, correctly implementing oracle network comes with multiple challenges. This defines how can anyone trust oracles and become the decentralized networks of information that blockchains need to bridge the gap between the on-chain and the off-chain interaction.

Smart Contract and Oracles

The concept of Smart Contracts was proposed by Nick Szabo in the early 1990s and his projections for their implementation and use are astonishingly accurate relative to their existence.

A Smart Contract at the high-level is a computer program comprised of code which defines its functions and state. Smart Contracts are typically referred to as operating on blockchains, where they can autonomously and transparently execute under specific conditions that are met over a distributed network. Blockchains transfer their immutability to smart contracts as once they are committed to the chain they cannot be changed.

The Smart contracts have a trustless execution where, the need for intermediaries is removed, and the traditional transactional functions are minimized and their ability to execute based on hard-coded parameters is exceedingly useful in a variety of scenarios like legal agreements and automated payments systems.  

In spite of all the clear benefits of the smart contracts are limited to a walled garden of on-chain data and the information within the blockchain and this limits their capacity to interact with the real world data and execute based on conditions outside of the blockchain network they exist on.


The main notion of the oracles even when they are decentralized oracles that have been around for years and continues to fuel debate about how to implement them and whether they can be trusted

When API’s or market data feeds are the methods used by Oracles to retrieve and verify external data for blockchains and smart contracts. The type of data required by smart contracts includes the information on the price feeds, weather information or even random number generator for gambling. The querying of a data source for specific information and subsequently connecting to that source to interface between the blockchain and the data feed. As a result, smart contracts can execute based on the particular information flowing from the data feed.

In the real-world markets and the web API’s for Data feeds are usually not deterministic like blockchains and smart contracts. Oracles will act as a bridge that can digest external and non-deterministic information into a format that a blockchain can understand execute particular conditions with. Oracles can even be used for N-of-M multisignature transactions to reach consensus on which transaction to sign, in relevant scenarios.

Oracles form the basis of platforms like Augur, which is a decentralized prediction market where Augur is more representative of complex Oracle itself that functions as a data feed based on the wisdom of crowd where the participant behavior effectively acts as the data source. Augur also utilizes oracles for reporting the result to prediction markets with an incentive structure driving honest reporting.

Mahendar B
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