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Oracles are required to help blockchain technology reach its full potential.

Oracles act as middleware for blockchain to communicate to real-world applications.

There are different type of oracles and industries they have use cases for.

2018 will be the year of decentralized oracles.





Have you ever wondered how your thermostat made your central air system at home turn on the air conditioning? Your thermostat is collecting data from the air and when the air reaches a certain temperature, it triggers your air conditioning to turn on. This works because your thermostat is wired to your unit and is constantly communicating with it. Now imagine your central air system communicating with thousands of thermostats all over the world and triggering your unit to turn on only if certain conditions are met. Then add something called a “smart contract” into the mix.

Your central air conditioning system can now interact with the thousands of thermostats around the world and also interact with thousands of electrical companies out there to find the lowest cost of electricity. This is similar to how blockchain technology works-- lines of code or computer programs execute functions when specific conditions are met. Smart contracts allow these functions to be self executing, self-sufficient, and decentralized which means anyone can verify or use these contracts. So how does blockchain technology fully take advantage of smart contracts? Enter… Oracles.

What are Oracles?

Why Are Oracles Required For Blockchain Technology To Succeed?

Data points can be generated from and understood at any point, providing increased flexibility, but has difficulty communicating with the blockchain. This foundational distinction makes the two worlds incompatible with each other by default and only the presence of an oracle can make two-way communication between them possible. Oracles act as the bridge between the two worlds. Smart contracts allow code to govern over data and economic interactions, and oracles are the services which allow code to become compatible with real world applications. Currently, centralized oracles like Oraclize exist, but the goal is to decentralize!

Who Are The Leading Decentralized Oracles?

Data Retrieval Oracles

Chainlink ($LINK) is a decentralized network of oracles founded in 2014 by Sergey Nazarov and Steve Ellis. LINK is an ERC-20 token, more specifically ERC-677, built on top of the Ethereum blockchain. The LINK Network allows anyone to securely provide smart contracts with access to key external data, off-chain payments and any other API capabilities. Anyone who has a data feed, useful off-chain service such as local payments, or any other API, can provide them directly to smart contracts in exchange for LINK tokens. What makes this project so exciting is that by owning LINK tokens, you can become a node operator that helps automatically retrieve data. By retrieving data from a node you are operating, you are paid rewards since they are using your services, aka dividends. A little fun fact, their CEO, Sergey Nazarov envisioned smart contracts to change the world even before cryptocurrencies exploded. In fact, the domain name, SmartContract.com, was created back in 2008.

White Paper

FAQ Github & Official Subreddit

Pros:

Strong and reputable team with one of the most technical white papers out there

One of the only decentralized oracles out there for data retrieval

LINK is directly working with SWIFT (network of 11k banks) on their own SWIFT Smart Oracle

This will allow smart contracts on various networks to make payments, send governance instructions, and release collateral with over 11,000 banks.

LINK is blockchain agnostic

Chainlink will be able to trigger smart contracts using Ethereum, Bitcoin, and Hyperledger

It is not limited to a single blockchain.

Cons:

Announcements are made only when major events happen

The team releases announcements less frequent than other cryptocurrencies. This is a double edged sword because they are acting very professional, but people in the cryptosphere lose interest when they are not fed information constantly.

No clear timeline for future releases or quarterly benchmark goals

Market Data Oracles

Augur ($REP) is a decentralized oracle and prediction market platform founded in 2014 by Jack Peterson and Joey Krug. It is an ERC-20 token that is built on top of the Ethereum Blockchain. Augur will be able to make a prediction on anything and users will be able to buy or sell shares in that prediction based on whether they think it will happen or not. This could be anything from the weather, to casino gambling, sports betting, or even elections. It is effectively betting, however, the price of each contract will add up to $1, so if the chance of an outcome happening was even money, the contract would cost 50 cents each with a probability of 50/50 of said event becoming true or false according to the platform.

White Paper

FAQ, Github & Official Subreddit

Pros:

Decentralized prediction market where users can bet on the outcome of future events

You’ll be able to virtually bet on almost anything regarding a future outcome

Solid and reputable team

Vitalik Buterin listed as one of the advisors

These futures contracts will resolve without trusted third parties, automatically making payouts

Cons:

Competition is stiff

Gnosis($GNO) & Delphi Systems($PHI) are competitors

Similar to Augur, Gnosis($GNO) is an ERC-20 token that wants to enable anyone to ask a question and fund the search for answers. This empowers everyone to participate in the aggregation and efficient evaluation of information as answers are crowd-sourced. Both Augur and Gnosis are racing to reach the top for prediction markets. Who will succeed?

White Paper

FAQs & Official Subreddit







Delphi Systems($PHI) is an ERC-20 token, that also uses ERC-223. Originally a competitor to Augur and Gnosis, their team had some fallout during their ICO phase and had to refund all their consumers contributions. They re-branded themselves from Delphi Markets to Delphi Systems, created a new whitepaper, and wanted to branch out of just prediction markets. They want to extend beyond the basic multisignature arrangement when it comes to the determination of the oracle input on a given smart contract. They’re still really new to the game and boast about a weight signature framework called Pythia. They talk a big talk, but have a lot to prove. We’ll be keeping an eye out to see if they can deliver.

White Paper

Official Subreddit







Oracles Worth Mentioning:

Mobius($MOBI) is built off the Stellar($XLM) Platform. They aim to be the oracle for consumer applications on their dApp store. Mobius APIs aim to ease the integration of the blockchain ecosystem within everyday applications. We should also note that Mobius creators are partnered with Waltonchain. Walton($WTC) isn’t necessarily using Mobius network, but they plan to work together to build new IoT solutions with the best hardware and software for the job.

White Paper

Official Subreddit







Conclusion

Decentralized oracles will lead the charge in 2018 for cryptocurrencies. With the hype dying down for random tokens, people will start looking into coins with actual utility use. External data needs to find a way to communicate with blockchain. Currently, many of these projects are working on releasing their mainnet this year. Testnets have been released for some of the projects, and it is up to the community and developers to find and fix as many bugs as possible.

As we saw, there are different types of oracles out there-- some that retrieve data and some that are used for prediction markets. The oracle space currently has room for all of the players mentioned in this article since all of them addresses different industries and use cases. Competition is needed to help drive motivation and to help accelerate the development of these Dapps. No one knows who will ultimately be the winner, but one thing is sure… 2018 will be another exciting year for crypto!





Cheers,

The Blockchain Musketeers

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Disclaimer: The information provided by the Blockchain Musketeers is our own opinions and should not be taken as investment advice, financial advice, or any other sort of advice. Nor should this information be used to determine if you should buy, sell, or hold a cryptocurrency. Please conduct your own due diligence and consult your financial advisory before making any investment decisions. Only invest money which you are willing to lose, as cryptocurrencies is not suitable for all users.