Flux protocol a special oracle. What makes it special and what are the oracles?

Let’s remember once again what an oracle is — these are third-party services that provide smart contracts with communication with external sources of information, i.e. act as a bridge between blockchains and the outside world.

There are many different kinds of oracles, but how it works depends entirely on what it is designed for. In this article we will look at some of these varieties.

Oracles in the blockchain can be classified depending on a number of different qualities:

Source — Is the data coming from software or hardware?
Direction of information — incoming or outgoing?
Trust — centralization or decentralization?

One oracle can fall into several categories at once. For example, an oracle that receives information from a company’s website is a centralized, programmatic oracle.

Software oracles

Software oracles interact with online sources of information and transmit it to the blockchain. This information can come from online databases, servers, websites, in fact, from any data source in the Internet space.

The fact that software oracles are connected to the Internet allows them not only to provide information for smart contracts, but also to broadcast it in real time. This makes them one of the most common oracles on the blockchain.

Basically, the data that software oracles are guided by includes: ratings of exchanges, the value of digital assets, real-time flight information, etc.

Hardware Oracles

For some smart contracts, interaction with the real world is a necessity. Hardware oracles are designed to receive information from the physical world and make it available for smart contracts. Such information can be transmitted from sensors, barcode scanners and other information reading devices.

In essence, the hardware oracle “translates” real events into digital values that can be read using smart contracts.

An example is a sensor that checks whether a truck carrying goods has arrived in the loading bay. If so, it transmits the information to the smart contract, which can then make a decision on this basis.

If you want to get acquainted with this topic in more detail, we recommend that you read the following article: “Options for using blockchain technology: supply chains”.

Incoming and outgoing oracles

Incoming oracles extract information from external sources and transmit it to smart contracts, while outgoing oracles act in reverse order, i.e. the oracle transmits the data they receive from the smart contract to an external source.

For example, the incoming oracle tells the smart contract what temperature the sensor is measuring, and the outgoing oracle regulates the operation of the smart lock. If funds are credited to the address, the smart contract sends this information through the outgoing oracle to the mechanism that unlocks the smart lock.

Centralized and decentralized oracles

The centralized oracle is controlled by one legal entity or individual and is the only provider of information for a smart contract. Using only one source can be risky, since the effectiveness of the contract depends entirely on the controlling entity. In addition, any malicious intervention by a fraudster will have a direct impact on the smart contract. The main problem of centralized oracles is the presence of a single point of failure, which makes contracts more vulnerable and less resistant to attacks.

Decentralized oracles, as well as public blockchains, share the same goals in an attempt to avoid counterparty risk. They increase the reliability of the information provided due to the absence of a single source of truth. A smart contract requests information from several oracles at once to determine the reliability and accuracy of data, for this reason, decentralized oracles can also be called consensus oracles.

Some blockchain projects provide services of decentralized oracles for other blockchains. Decentralized oracles can also be useful in prediction markets, where the reliability of a certain result can be confirmed based on social consensus.

While decentralized oracles pursue the goal of achieving trust, they, like blockchain networks without trust, do not completely abandon the need to trust someone, but rather distribute it among many participants.

Contract-oriented oracles

A contract-oriented oracle is a type of oracle that is intended to be used exclusively within a single smart contract. This means that if someone wants to deploy multiple smart contracts, it is necessary to develop a proportional number of contract-oriented oracles.

Such oracles are considered very time-consuming and expensive to maintain. Companies that want to extract data from various sources may find this approach extremely impractical. On the other hand, since this type of oracle can be developed from scratch so that they correspond to a specific use case, their developers have high flexibility in specifying the necessary requirements for the oracle.

The Oracle Man

Sometimes, specialists in a particular field can also act as oracles. Their responsibilities will include studying and verifying the authenticity of the information received from various sources and transferring the already processed data to smart contracts. Since oracle people can verify their identity using cryptography, the probability that a fraudster will authenticate on their behalf and provide modified data is relatively small.

Why Flux protocol is it special?

Flux Oracle is optimized to scale to support a near infinite range of integrations.

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