Oracles: The Invisible Backbone of DeFi and Applied Blockchain Apps

BrainstormingYou may be deceived if you trust too much, but you will live in torment if you don’t trust enough.Frank CraneA smart contract is software code that runs on a blockchain network, such as Ethereum, and performs actions or tasks based on certain events. Suppose I wanted to make a transaction where I provide the receiver’s address and proof that I have and own the funds to the network. Provided everything checks out, the network will ‘transfer’ the funds to the receiver.What if I wanted to create a decentralized application that needed external data such as the current weather temperature, the price of Ethereum, or even the results of a baseball match?How does a smart contract, or, in other words, a piece of code on a blockchain, get this information? This is where oracles for blockchain applications come in.https://woj.finance/The term Oracle literally means a reliable source of information. So, a dictionary could even be considered an Oracle. However, we want to avoid unreliable information, so we introduce redundancy. However, we also consider gas fees. The gas fee for 3 external sources of data is 3x the normal gas fees. As such, we can take an average or pick a median.What is an oracle?An oracle can be regarded as an off-chain platform that relays data on-chain. It is also an off-chain platform that connects blockchains to other systems. Relaying data from web servers to the blockchain is the duty of Oracles. Most decentralized applications, apart from DEXes, use Oracle.In order to have reliable data and avoid a single point of failure or to guard against a rogue Oracle node, we sometimes choose to have redundancy. We introduce more nodes. For instance, if we want to take collateral against a Defi loan, we would like to have multiple sources for the price…