Understanding Oracles

Blockchains are great at storing information. However, they are limited in that they cannot access information outside of the blockchain. For simple payment networks, this may not be an issue. Smart contract platforms are much more than simple payment networks though.

External Information

Smart contracts can be used for many things and are programmed to execute when certain conditions are met (just like a real contract). However, the inability to use external information (outside of the blockchain) quickly becomes an issue.

Take prediction markets as an example. Perhaps there’s a sports bet on a World Series game. In this simple model assume there are just two people making a bet. A smart contract will be created and both parties will send money to it (in the form of cryptocurrency).

The smart contract will then hold the money until the end of the game and send the money to the winner of the bet. However, the smart contract doesn’t know who won, it can’t go to ESPN.com and see which team won the game. This is the problem that oracles solve.

Diagram from oraclize.it


Oracles are the source of external information for smart contracts. The oracle gathers the required information and feeds it to the smart contract. For the example above, the oracle would provide the winner of the game to the smart contract. The smart contract would then execute and send the money to the winner.

One issue for oracles is trust. Oracles act as an authority and require trust by those who use them. One proposed solution to this has been to decentralize the oracle. Some projects are attempting this by taking information from many sources and thereby having multiple responses to each piece of information requested. This can be a good way to eliminate reliance on one source but also comes with new challenges, such as having conflicting information.

There’s no easy way to solve the trust problem of oracles, however, oracles will certainly be an important piece in the adoption of smart contract platforms.


Sign up for our newsletter to receive recent news & updates, and follow us on social media:

Website | Twitter | Linkedin | Facebook | Telegram


Legal: legal@stably.io

Press: marketing@stably.io

Exchanges or Market Makers: exchanges@stably.io

Partnerships: info@stably.io

Investors: Kory Hoang, CEO — kory@stably.io

Stably is the creator of Stably USD, a USD-backed stablecoin and Stably Prime, a borderless account with a multitude of financial services and products, customizable to the individual or institutions specific needs.

All asset custody, funds processing, convertible virtual currency administration, trustee and fiduciary services are provided by Prime Trust, a Nevada chartered financial institution and licensed trust company. Digital assets are held in secure cold storage and USD funds are held in FDIC-insured bank accounts by Prime Trust. Stably is not a licensed financial institution and Stably does not manage nor take custody of client funds. Prime Trust neither endorses nor guarantees any of the information, recommendations, optional programs, products, or services advertised, offered by, or made available through the external website ("Products and Services") and disclaims any liability for any failure of the Products and Services.

Please note: By clicking on some of the links above, you will leave the Stably website and be directed to an external website. The privacy policies of the external website may differ from our privacy policies. Please review the privacy policies and security indicators displayed on the external website before providing any personal information.

Copyright © 2019-2020 Stably Corporation. All Rights Reserved