From a structural point of view, the blockchain is actually a fairly closed system. The system itself hardly communicates with the external environment. The data generated by itself on the chain cannot be used outside the chain, and the data outside the chain cannot be directly uploaded to chain. In addition, its decentralized ecological environment is also incompatible with today's Internet.
Some people may wonder, since the blockchain is so independent, why can we still exchange data on and off the chain? Here we need to mention a very critical content - the oracle. This is a bridge connecting the on-chain and off-chain. It is mainly responsible for transferring the off-chain data to the blockchain smart contract. At the same time, it also allows people to transfer data from the blockchain to the off-chain world.
Various application scenarios derived from blockchain technology continue to increase, and its dependence on data also increases, which makes oracle machines more and more important.
In fact, it is a very simple matter to open up the data interaction between the blockchain and the external environment, and the more important function of the oracle machine is to achieve the credibility of the data. And trust is also a core principle in the blockchain.
Based on the different ways to achieve data credibility, oracle machines are mainly divided into three different types, namely centralized oracle machines, decentralized oracle machines, and alliance oracle machines.
Centralized oracle
This kind of oracle is a way for a single centralized organization to provide data for the blockchain. From this form, it is not difficult to understand that users need to believe that the centralized institution will not deceive it to generate a basis of trust, and the institution itself needs to prove its own credibility.
Since this kind of centralized oracle machine uses a single data source, it is easy to have a single point of failure, which will cause data problems. And if the centralized organization commits malicious acts, it will be difficult for users to restrain them, so that there will be certain risks in the security of data.
Of course, centralized oracles are not without advantages. Due to its single-node operation, this eliminates the need for a large number of nodes to coordinate with each other during the data transmission process, thereby greatly reducing data verification and processing time, improving efficiency, and reducing costs.
Decentralized Oracle
Contrary to the centralized oracle machine, it relies on many nodes to form a decentralized network, which is also in line with the principle of the blockchain, relying on the consensus and coordination between nodes, thus ensuring the high reliability of the data. Reduced the possibility of man-made evil.
Generally speaking, a part of the digital assets of the participating nodes will be pledged in the decentralized oracle machine. Once evil happens, these assets will be confiscated as a punishment. Correspondingly, it also provides a certain incentive mechanism to provide participants with benefits, thereby ensuring the participation of users.
Of course, the execution efficiency of this kind of decentralized oracle machine is relatively low, and the cost is also more expensive.
Alliance Oracle
This is a kind of oracle machine between the previous two oracle machines. In essence, it is still a decentralized oracle machine, but the participating nodes are not conventional any users can participate, but some trusted institutions as nodes.
This kind of oracle machine is a compromise solution. Its trust, cost, and efficiency are all in an intermediate state. It is a cost-effective strategy for the blockchain that is currently in its initial development stage.