Blockchain oracles serve as the way for smart contracts to interact with the data outside of the blockchain network.

Think of blockchain oracles as translator of the informational external to the platform. They provide the required data to kick off smart contracts to execute the moment the specified conditions of the contract are met.

Blockchain oracles are needed in the system simple because blockchains like those of bitcoin and Ethereum cannot readily access the information outside of the chain. 

Importance of Blockchain Oracles

Smart contracts cannot function and therefore are useless if there’s no data source. On the other hand, with these systems, smart contracts have real world applications in virtually every field under the sun. 

One the information reaches the blockchain, it can be used to execute the contracts and offer use cases, which can revolutionize various industries across the world. 

Blockchain is deterministic.

The above statement is primarily the reason why blockchain cannot communicate with the external world without using oracles. 

Formats are different. Blockchain being deterministic means that it is the reflections of a specific string of events that take place one after the other in a sequence. Accessing data outside of the blockchain would require data points that are not sequential. 

Therefore, it’s impossible for the blockchain to “understand” that data. This aspect of the blockchain gives it immutability, but, obviously, lowers its flexibility. 

The off-chain world is non-deterministic

…which means that there’s no record of the events in the specific order that they have occurred. This creates a problem with transparency. Data points can be “understood” at any point, increasing its flexibility. However, as mentioned, it cannot communicate well with the blockchain. 

The presence of an oracle is the only way to reconcile these two differences.


Blockchain developers from around the world are creating ways to better integrate the blockchain technology in the off-chain world. Since oracles are basically smart contracts created to interact with the blockchain by providing necessary data, they need developers skilled in both off-chain and decentralized fields. 

Interesting developments have already taken place to address this need. For example, oracles would permit blockchain connections to any existing PAI, payment via traditional payment networks from blockchain, and inter-chain connections between smart contracts and other blockchains. 

Companies for Oracle Development 

The marketplace for these highly sophisticated middleware software models is growing quickly. It’s likely that the demand will increase as new ways to utilize the blockchain technology are hatched on a daily basis.

At present, the marketplace is led by several companies actively developing oracles.  For one, Oraclize serves as the industry leader in terms of oracle technology. Other startups are also seeking market shares in this field. 

Also, huge names in the tech sector, like IBM and Microsoft, are starting to see the potential for huge market presence and are now developing these platforms now.

Trends of the Future

The development of a unified and integrated communication platform between the blockchain and the outside world is obviously a trend in the future. Standardized tools and interfaces will also make it easier for developers to see tight competition between various providers.