What are Oracles? Why do we need them, and what are a few use cases?
Oracles facilitate the connection of real-world data to on-chain applications.
In Web3, an API alone doesn’t cut it.
Introduction
Let’s say there was a decentralized smart contract sports betting platform. You bet that the Golden State Warriors will win the NBA Championships this year. To make this platform work, you would need to obtain real-world data and connect it to the smart contract. This is where Oracles come in. Oracles retrieve the data from the game in real-time and update the smart contract. At the end of the game, the final score will be posted on the smart contract platform and will determine whether you won the bet.
Any industry that you want to work with using smart contracts requires connecting to an Oracle because Oracles make it easier and simpler to obtain, use, and update (both to and from) data from external sources. If we are going to focus on creating enterprise use cases that actually deliver value using the blockchain, an Oracle becomes a necessary component to accomplish that. While there are many other benefits to creating and working with Oracles, we’ll focus on three main industries where enterprise use cases involving Oracles deliver the most value.
DeFi
DeFi was one of the first users of Oracles. DeFi platforms rely on Oracles to enable price data feeds. The price data enables DeFi platform users to get real-time data on token prices from decentralized exchanges. This makes it possible to aggregate and enable real-time price data for hundreds of tokens simultaneously using an API interface through an Oracle.
Oracles are being implemented in more and more platforms because they allow for accurate real-time data for a wide range of DeFi products. Think of it like a Bloomberg Terminal for DeFi products.
Insurance
Another industry benefiting from the use of Oracles is the insurance sector, especially using price feeds for insurance claims. Data would come from driving habits, aggregated insurance prices, and general market insurance data. This data connects to a smart contract platform via an Oracle to facilitate automatic payments with built-in “zero-trust” systems.
Needless to say, this technology offers advantages to insurers, brokers, and consumers alike. Not only does this allow for a faster service for the claims process, but also lowers cost through the removal of an intermediary and promises to significantly cut down on fraudulent claims.
Interoperable Software
With the rise of over 15+ Oracles supporting a wide variety of blockchains, interoperability becomes important. Imagine you were using Chainlink, but needed to switch over to API3 because your current provider did not support a specific blockchain. You would need to migrate all of your data from one platform to another, which could prove costly and time-consuming.
Enter Weavechain. Weavechain enables easy access between the most popular Oracles, including Chainlink, Witnet, and full support to come to API3, Provable and many more by the end of 2022. Weavechain allows you to connect to any database that acts as a middleware without ripping and replacing your current solution, so your data stays right where it is without costly migrations. In fact, you can publish to any Oracle without custom engineering.
Conclusion
The bottom line is Oracles will continue to serve as a key part of many Web3 products. For Web3 to be taken seriously, we need products that have real-world applications by addressing existing problems that could be solved more effectively with Web3 solutions.
Weavechain aims to be a cornerstone in the enterprise interoperability space, acting as middleware to let you publish to any Oracle without custom engineering. With 26 supported databases and storage types, 11 blockchains, 4 transport protocols, and 2 of the most popular Oracles with plans to support many more on our roadmap, our goal is to enable developers and products to connect on their preferred systems without constraints or painful migrations. Reach out to us for more information, or sign up for our private beta.
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