What is Decentralized Oracle?

Blockchain and smart contracts bring innovation by removing the barriers associated with trust. But blockchain innovation will still be limited until smart contracts can trustless (do not need to trust) get input data outside the chain ecosystem (data offchain). Decentralized oracles are gateways for smart contracts to interact with the outside world which means reducing dependence on one source only, this will bring a new wave of innovation.

Decentralized oracle networks eliminate the single point of failure in a smart contract by utilizing multiple input data. This enables end-to-end reliability and enables high value smart contracts to run in a low trust environment.

The use of a decentralized oracle

Any blockchain project that tries to do anything other than a digital store of value will need a decentralized oracle network to attract potential users. However, if you use a centralized oracle, it will be a single point of failure and its reliability cannot be ascertained.

• Decentralized Oracle For Financial Product Smart Contracts
  Examples of projects that use oracles for financial products: CDx, dYdX, MakerDAO, Vega Protocol, 0x protocol. All of them require a trustless data feed to ensure proper on-chain execution.

• Insurance Smart Contract
  Some examples of smart contracts in insurance: Automatic payment in case of delayed flight with Etherisc or Fizzy, incentives to local oracles by Nexus Mutual, innovative and programmatic insurance by FlyingCarpet

• Delivery of Goods / Shipment
  Examples of projects that use oracles for Shipment services: FOAM, making location information decentralized.

• Collateralized Lending & Stablecoin (Decentralized Finance/DeFi)
  For example DAI from MakerDAO which guarantees Ether requires a lot of oracles reporting the price of Ether to find out when the investment is undercollaterized so that it will be liquidated.

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