Blockchain: what are they, how they work and why are they so important?

Blockchain is one of the key tools used by smart contracts.What are they, how they work and why are they so important?

Over the past 18 months, decentralized finances (DEFs) have become a prosperous alternative to the traditional banking system - an open sector, whose total value exceeding $ 200 billion competes with the GDP of many national states.

Decentralized applications (DAPPS), which spread like endless tentacles in the Defi landscape, allow everyone in the world to borrow, save, trade with the help of digital resources.All they need for this is an internet connection and a web3 portfolio.

The times when you had to go to the bank to open an account or submit a loan application, they seem to be a bit smacking with the mouse.

A large part of the merit of rapid growth of defers should be used to chain of Ethereum blocks and its smart contracts - self -enforceable contracts that eliminate the need for any interference from the third part.If Ethereum represents the building in which the transaction takes place, the smart contract is the sign above his door.For this reason, they are often referred to as the spine of the industry.

However, there is a second and perhaps equally important element of the infrastructure puzzle that allows DEFI structures to work: oracles.

Example of action of Blockchain oracle:

Let's assume that Alicja and Bob want to bet on the result of the match.Alice puts $ 20 per team A, and Bob puts $ 20 per team B.When the match ends, where does a smart contract know if to transfer funds to Alice or Bob?

In order for the winner to be transferred to the winner of the plant, the contract requires the use of the oracle mechanism, thanks to which it will get the exact result of the match in the form of data from outside the block chain and will provide it to it in a safe and reliable way.

Fundamenty zdecentralizowanych aplikacji

Neither blockchains nor smart contracts operating within them are able - in themselves - able to access data from outside their network.To know what to do, a smart contract often needs access to information from the outside world, which are relevant to the contract in the form of electronic data, also called oracles.These are the services that send and verify real events and send information about them to smart contracts, causing changes in the state of the blocks.

The oracles are therefore supplied by a smart contract with information from the real world that can trigger predefined actions.This external data comes from the software (Big Data) or equipment (Internet of Things).These can be any data, such as air temperature, successful payment, price fluctuations or the result of a football match.

However, it should be remembered that the smart contract is not waiting for the data from the external source to enter the system.The contract must be called. Oznacza to, że na wywołanie danych ze świata zewnętrznego ​​trzeba wydać zasoby sieciowe.This generates transaction costs.In the case of Ethereum, this would be based on gas.

Różne rodzaje wyroczni blockchain

Depending on their functions and processed data, several types of oracle can be distinguished:

Dlaczego blockchain potrzebuje wyroczni?

Block chains without oracles are like computers without internet access - valuable, but largely powerless on the interoperability front.

Often referred to as hybrid Smart contracts, the combination of blockchain (unchanging chain code) and oracle (secure data outside the chain) creates a powerful synergy that prepares the ground for advanced blockchain applications.Oracles allow previously closed networks to use reliable external information and interaction with older systems, as a result of which smart contracts are created that can react to real events and integrate with established business processes.

Wyzwania

Since smart contracts "make decisions" based on data provided by the oracles, they are the key to the "health" of the blockchain ecosystem.

The main challenge related to oracles is that people must trust this external sources of information, regardless of whether they come from the website or from some sensor.

As oracles are the services of third parties, which are not part of the blockchain consensus mechanism, they are not subject to basic safety mechanisms provided by a public block chain.Positioning between the Smart contract and the oracle, it would be possible to conduct a man-in-the-middle attack ".

Ensuring the solidity of this "second layer" is of great importance.As a way of solving these problems, you can use various trusted computing techniques.However, this topic will require more attention, because secure oracles are a bottleneck for the safety of Smart Contracts.If the suppliers of the oracle fail to provide them with the expected level of security, it may result in a significant slowdown in the development of subsequent implementation.

Oracles are not part of the main blockchain consensus, so they are not part of security mechanisms that can provide public blockchain.The conflict of conflict between third parties and not requiring trust in the implementation of Smart contracts remains mostly an unsolved problem.

Pomost między światem rzeczywistym a cyfrowym

It is obvious that the future of decentralized finances depends not only on blockchain, and the smart contracts and oracles constitute two necessary elements of this puzzle.

Decentralized oracles (in particular chainlink) have the potential to introduce protective mechanisms that can eliminate many system threats from the blockchain ecosystem.Blockchain Oracles remain one of the key structural elements that should be implemented in a safe way so that the entire block chain ecosystem can develop freely.

In the end, so that smart contracts can become a superior form of contracts as such, we need access to various and reliable data.Insurance based on blockchain, prognostic markets, supply chain management, digital identity ... - It's all an exciting future that needs an oracle.

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Developed on the basis of: Introduction the Oracles