Third-Party Oracle

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Pronunciation

[thurd-par-tee awr-uh-kl]

Analogy

Think of a third-party oracle as ordering the daily weather report from a specialized meteorological service before planning your picnic.

Definition

An external service that provides data—such as prices or weather—to smart contracts, introducing a trust assumption outside the .

Key Points Intro

Third-party oracles deliver information to applications.

Key Points

Data accuracy: depends on provider’s integrity and sources

Latency: introduces delays based on API response times

Cost: each data request incurs gas and service fees

Trust model: adds an external trust boundary to contracts

Example

A lending queries Chainlink’s ETH/USD third-party oracle to determine collateralization ratios before approving loans.

Technical Deep Dive

nodes run job specifications that listen for requests, fetch data via HTTPS or APIs, sign results with private keys, and submit transactions to fulfill callbacks. Aggregator contracts combine multiple providers’ responses to mitigate single-source failures.

Security Warning

Compromised or outdated feeds can lead to erroneous contract behavior and financial loss.

Caveat

Centralized providers can become single points of failure or censorship vectors.

Related Terms

Pull Model Oracle

Push Model Oracle

Blockchain & Cryptocurrency Glossary

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