Blockchain oracles works as intermediaries between the world of cryptocurrency and the rest of the world. Oracles facilitate the transfer of relevant information between a blockchain's smart contracts and off-chain sources. Think of oracles as middleware or APIs for the Web3 space, and moving data from non-Web3 sources onto a blockchain.

---

Without oracles, blockchains like Ethereum would only manage on-chain activity and wouldn't have a access to communicate with the outside world. Oracles bridge this gap, accessing off-chain data to be brought into decentralized applications (dApps).

Using blockchain oracles opens up countless possibilities for the integration of blockchain technology into a real world. For example, a decentralized exchange (DEX) can use an oracle to track the price of a stock on the New York Stock Exchange, allowing people to trade security and tokens without needing a centralized broker. Oracles can also enable trustless transfers of real-world assets like property, allowing for automated smart contracts to handle many real-world transactions.

Although oracles are commonly used for price feeds on Decentralxe EXs, developers are just beginning to explore their many good applications. Without blockchain oracles, blockchain's potential use cases would be very limited, and its interaction with the broader economy would be impossible.

1 ) SOFTWARE ORACLES : Software oracles are that type of oracle that uses software to gather and process data from online sources. They can collect data on a very wide range of subjects, including temperature, commodity prices, flight or train delays, and more. The software oracle after that pushes this data into the smart contract, allowing it to be used to trigger actions and make decisions.

---

2 ) HARDWARE ORACLES : Hardware oracles are that type of oracle that collects directly data from the physical world. They can be used to detect movement, track inventory in supply chain & management, or collect other types of data from the real world. The data collected by hardware oracles is then used to trigger actions within small contracts.

3 ) INBOUND ORACLES : Inbound oracles are that type of oracle that provides data from the external world. They can collect data on a wide range of subjects, including weather, news, & financial data. The data provided by inbound oracles can be used to trigger actions within smart contracts, allowing them to respond to the real-world events.

4 ) OUTBOUND ORACLE : Outbound oracles are that type of oracle that provides smart contracts with the ability to send data to the outside world. For instance , a smart lock can receive payment on its blockchain address and automatically unlock. Outbound oracles can also be used for send data to external systems or APIs.

5 ) CONSENSUS-BASED ORACLES:
Consensus-based oracles are that type of oracle that relies on human consensus and prediction markets to gather data. They use multiple sources of information and may require a some number of sources to agree on a particular outcome before triggering an action. This approach helps to ensure that the data used in smart contracts is accurate and minimize the risk of manipulation. Prediction markets that use consensus-based oracles typically have a rating system for oracles to increase further their accuracy.

Decentralized oracles are a important and most component for unlocking the full potential of smart contracts. A decentralized oracle network consists of independent blockchain oracles that retrieve data from off-chain sources and bring it into on-chain to provide a deterministic value of truth. Chainlink is a popular framework that enables the selection of independent nodes and connect real-world data to the blockchain for smart contracts.

---

The decentralized network (DN) of Chainlink ensures that there is no single point of failure, and the documentation is user-friendly, making it accessible to beginner engineers and experienced developers alike. By using a network of independent nodes, smart contracts can access in diverse and reliable data, which is necessary for them to be a superior form of agreement.

Moreover, blockchain oracles also enable interoperability between different blockchains, which is the next important step towards towards a truly connected ecosystem. With decentralized oracles, blockchains can be more secure and more reliable, and Chainlink is working constantly to integrate with more blockchains and so that all of them can access secure off-chain data.

A great use case for a decentralized oracle is in the world of supply chain management (SCM). Supply chain management is the process of managing the flow of goods & services, its includes the movement and storage of raw materials, work-in-progress inventory, and it finished goods from the point of origin to the point of consumption.

---

Traditionally, supply chain management (SCM) has been a complex process involving multiple parties, including manufacturers, distributors, retailers, and consumers. Each of these parties has their own system for tracking and managing goods & services, leading to a lack of transparency and trust in the supply chain.

This is where a decentralized oracle that can help. By using a decentralized oracle network to provide real-time data and updates on the status of goods and services, all parties are involved in the supply chain can have access to the same information. This can also help to increase transparency and trust in the supply chain, as all parties can see the same information at the same time, leading to faster decision making & better risk management.

_pixabay

For instance , imagine a scenario where a company is shipping goods from one country to another country . With a decentralized oracle network, the status of this shipment can be tracked in - real-time, including the location of the shipment, its temperature, and its condition. This data can be verified throgh multiple independent nodes, and providing a high degree of certainty that the data is accurate and reliable.

Moreover, if there is a delay or a problem with the shipment, than decentralized oracle can alert all parties involved in the supply chain, allowing them to take immediate action to resolve the problem . This can help to minimize the impact of supply in chain disruptions, reduce costs, and increase customer satisfaction.

---

_pixabay
Here are some use cases for blockchain oracles, organized by industry:

1 ) : Decentralized Finance (DeFi)
Oracles are most in Decentralized , where they provide access to financial data about assets & markets. They are used in decentralized money markets, synthetic asset platforms, and automated market makers (AMMs) to estimate borrowing capacity, check for undercollateralization, peg token values to real-world assets, and concentrate liquidity in the market prices.

2 ) : Dynamic NFTs and Gaming
Oracles enable non-financial use cases for small contracts, such as dynamic NFTs that can change mostly based on external events, and verifiable randomness used in on-chain gaming applications to create more engaging and inteteresting gameplay experiences.

3 ) : Insurance
Input oracles are used in insurance smart contracts to verify that occurrence of insurable events during claims processing, while output oracles provide a way to smart contracts to make payouts on claims using other blockchains or traditional payment networks.

4 ) : Enterprise
Cross-chain oracles make a secure blockchain middleware that allows enterprises to connect their backend systems to any blockchain network. This enables them to read andwrite to any blockchain, perform complex and logic, and deploy assets and data across chains and counterparties.

In conclusion , a decentralized oracle can be used in a supply chain management system to provide real-time external data that is needed to execute the smart contracts in a trustless and secure manner.