What Is a Blockchain Oracle? What Is the Oracle Problem?
Summary
TLDRThis video script delves into the concept of oracles in blockchain technology, explaining their necessity due to the deterministic nature of blockchains which cannot access external data directly. It introduces the 'oracle problem' arising from reliance on centralized data sources, which contradicts the decentrality principle of blockchain. The script highlights Chainlink as a solution, offering a decentralized network of oracles to securely bridge smart contracts with real-world data, thus maintaining the integrity and potential of blockchain applications.
Takeaways
- 🔒 Smart contracts require determinism to ensure all nodes on the blockchain can validate transactions and reach consensus on the state of the blockchain.
- 🌐 The 'oracle problem' arises when smart contracts need to access external data, which can disrupt the determinism and decentralization of blockchains.
- 🔮 An oracle is a middleware that connects deterministic blockchains with real-world data, allowing smart contracts to access information from outside the blockchain.
- 📈 Oracles input data onto the blockchain through external transactions to maintain the integrity and determinism of the blockchain's state.
- 💡 The use of centralized oracles can undermine the decentrality of smart contracts, creating a single point of failure or control.
- 🔄 The oracle problem is the combination of the inability of blockchains to access external data and the risks associated with centralized oracles.
- 🛡️ Chainlink is a decentralized oracle solution that mitigates the risks of centralization and enhances the reliability of smart contracts.
- 🔄 Chainlink operates by using a network of nodes and data providers to ensure the availability and accuracy of the data fed to smart contracts.
- 👥 Chainlink's decentralized approach allows the network to be resilient against issues like node failures, hacks, or data source deprecation.
- 🛠️ The script encourages further exploration of Chainlink's functionalities through documentation and community engagement.
- ⚠️ A disclaimer is given that while single centralized oracles might be used in examples for demonstration, they should be avoided in production for the sake of decentrality and security.
Q & A
What is the primary function of an oracle in the context of blockchain and smart contracts?
-An oracle serves as a bridge between deterministic blockchains and real-world off-chain external data, allowing smart contracts to access and utilize this data without compromising the blockchain's determinism.
Why is it problematic for a blockchain to incorporate non-deterministic elements like API calls directly into transactions?
-Incorporating non-deterministic elements such as API calls can lead to inconsistencies across the nodes validating the transactions, as the data retrieved from the API could change between calls, preventing consensus on the state of the blockchain.
What is the 'oracle problem' and why is it significant in the context of smart contracts?
-The 'oracle problem' refers to the challenge of using centralized oracles that can compromise the decentrality and security of smart contracts. It combines the issues of blockchains being unable to access external data and the risks associated with relying on a single, centralized data source.
How does Chainlink address the issues presented by the oracle problem?
-Chainlink provides a framework for creating a decentralized network of nodes and data providers, ensuring that smart contracts have access to reliable and secure external data without relying on a single, centralized source.
What is the role of consensus in blockchain technology?
-Consensus is the mechanism by which all nodes in a blockchain agree upon a data value, ensuring the integrity and consistency of the blockchain's state. It is a key ingredient that makes blockchain technology work effectively.
Why is determinism important for blockchain transactions?
-Determinism is crucial for ensuring that all nodes can independently and consistently validate transactions and reach a consensus on the state of the blockchain. It allows for the replay of transactions from the genesis block to the current state and achieve the same result.
What are some potential risks associated with using a centralized oracle?
-Using a centralized oracle introduces risks such as the potential for the oracle to be hacked, manipulated, or to provide inaccurate data, which can have significant consequences for the execution of smart contracts and the integrity of the blockchain.
How does Chainlink ensure the security and reliability of data provided to smart contracts?
-Chainlink leverages a decentralized network of nodes and data providers, which helps to mitigate risks associated with centralized oracles. If one node or data source is compromised, the network can continue to operate securely and reliably.
What is the significance of Chainlink being open source?
-Being open source means that Chainlink's code is publicly accessible, allowing anyone to review, contribute to, and build upon it. This fosters transparency, community engagement, and continuous improvement of the platform.
What is the advice given in the script regarding the use of centralized oracles in production systems?
-The script strongly advises against using a single centralized oracle in production systems due to the risks it poses to the decentrality and security of smart contracts. Instead, it recommends using decentralized oracle networks like Chainlink.
How does the script encourage further exploration and contribution to the Chainlink community?
-The script encourages viewers to explore Chainlink's documentation, follow tutorials, and engage with the community by making pull requests (PRs) and joining the community to contribute to the open-source project.
Outlines
🔗 Understanding Oracles and the Blockchain
This paragraph introduces the concept of oracles in the context of smart contracts and blockchain technology. It explains the necessity of oracles to bridge the gap between deterministic blockchains and external, real-world data. The paragraph discusses the 'oracle problem,' which arises from the potential for centralized oracles to compromise the decentrality of smart contracts. The video script also touches on the importance of determinism in blockchain for achieving consensus among nodes. It sets the stage for exploring Chainlink as a solution to these issues, emphasizing the need for a decentralized approach to oracles.
🛠 The Role of Chainlink in Decentralized Oracles
The second paragraph delves into the specifics of Chainlink as a decentralized oracle solution. It serves as a framework for selecting a network of nodes and data providers, ensuring that smart contracts can securely access external data without compromising on decentrality. The paragraph cautions against using single centralized oracles in production systems, highlighting the risks associated with such an approach. It also invites viewers to explore Chainlink's functionalities further through documentation and tutorials, emphasizing the open-source nature of the project and encouraging community involvement.
Mindmap
Keywords
💡Smart Contracts
💡Chainlink Oracle
💡Determinism
💡Consensus
💡API Calls
💡Blockchain Middleware
💡Oracle Problem
💡Decentralization
💡Data Provenance
💡DeFi (Decentralized Finance)
💡Farmer Insurance Contracts
Highlights
Introduction to the concept of using an API to get the price of Ethereum for smart contracts.
Explanation of the necessity of Chainlink Oracles for incorporating external data into smart contracts.
The importance of determinism in blockchain transactions for achieving consensus among nodes.
The problem of non-determinism when nodes validate transactions based on variable data like Ethereum's price.
The challenge of API calls leading to different results among nodes, preventing consensus in the blockchain.
The definition and role of consensus mechanisms like Proof of Work and Proof of Stake in blockchain.
The need for smart contracts to connect with external APIs for functionalities like DeFi and decentralized insurance.
The introduction of Oracles as middleware that connects deterministic blockchains with off-chain data.
Description of how Oracles enter data on the blockchain through external transactions to ensure verification.
The 'Oracle Problem' arising from the use of centralized oracles compromising the decentrality of smart contracts.
The risks associated with centralized oracles, including potential hacking and control over smart contract execution.
Introduction of Chainlink as a solution to the Oracle Problem, providing a decentralized network of nodes and data providers.
Chainlink's role in maintaining the reliability and security of smart contracts by decentralizing data sources.
A cautionary note against using single centralized oracles in production systems for smart contracts.
Encouragement to explore Chainlink's open-source code and join the community for further learning and contribution.
A preview of upcoming content focusing on practical implementation of APIs and smart contract functionalities.
Transcripts
at the end of our last video we called
an api to get the price of ethereum into
our smart contract
in order to get this external data into
our smart contracts
we have to use the chain link oracle in
this video we're going to go over
what an oracle is why you need them and
the oracle problem
now these are crucial pieces to
understand because they unlock
the full potential of smart contracts so
let's dive right in
when a transaction occurs in the
blockchain it needs to be validated by
every other node in the blockchain
so that they can all agree we can see
when we send five dollars from bob to
alice
we can simply subtract five from bob's
wallet and
add five to alice's wall this is easily
reproducible by every other node on the
network but what if that wasn't the case
let's imagine a blockchain that allows
for non-determinism
and allows for nodes to validate each
other based off some variable let's say
we want to send a variable amount from
bob dallas we want to send the price of
ethereum
at that time so we have our node call an
api
to get the price of ethereum send it
over to alice
now when every other node goes to
validate the transaction they too have
to call this api
but what happens now if we call this api
even an instant later
the api could be changed updated hacked
or just appreciated
and now all the other nodes are going to
get a different result and not be able
to validate
and be in the same state as the first
node this means that none of the nodes
would be able to actually agree upon
what
the state of the blockchain is it's for
this reason that the ethereum blockchain
and
blockchains in general are designed to
be entirely deterministic
this means that if we replayed every
transaction from the genesis block 0
to where we are currently we should end
up in the exact same state
if we add api calls to these
transactions
we're going to end up in wildly
different states and no node is going to
be able to have consensus with
what the actual state of the blockchain
is in blockchain the mechanism for
agreeing upon a data value is called
consensus
and determinism is really important so
that nodes can come to this consensus
you might have heard of some like proof
of work with nakamoto consensus or proof
of stake or
or any others out there as well
consensus is one of the key ingredients
that makes blockchain work in the first
place
now at the same time we need blockchain
and we need smart contracts to be able
to connect to the outside world and
connect to the apis
so that we can do more interesting
things we need to get the price of
ethereum and other cryptocurrencies so
we can do anything in defy
we need to get weather data so we can
have decentralized farmer insurance
contracts
we need this data to use blockchain for
the pinnacle of its purpose
so how do we bridge the world with this
constraint enter oracles
an oracle or is any device or entity
that connects deterministic blockchains
with real-world off-chain external data
the way they work is these oracles
actually enter data on the blockchain
through an external transaction this way
we can guarantee that the blockchain has
all the information needs to verify
itself so instead of calling an api
an off chain oracle will actually get
the api
and then report it on chain in a
transaction that way there's no api
calling in the ethereum
or blockchain virtual machine itself
this is why oracles are known as
blockchain
middleware as they bridge the blockchain
world to the real world
seems simple enough though but there's a
big problem with this
it's commonly referred to as the oracle
problem let's take a quick step back and
remember why we're building on
blockchain in the first place
a huge region for smart contracts is
decentrality however
data has to come from somewhere if we
import data
onto a decentralized blockchain through
a centralized or single api
note or source we are now essentially
removing
one of the main benefits that blockchain
has in the first place a centralized
oracle or data source
means that that single oracle or data
source now has control
over the entire execution of your smart
contract and your smart contract is now
no better than a regular contract
even if the centralized oracle has the
best intentions we've seen cases where
oracle's are
hacked and catastrophe has ensued the
oracle problem can be defined as these
two pieces combined
number one blockchains themselves can't
access external data
and number two using centralized oracles
essentially nullifies the decentrality
of the smart contract
now enter chain link chain link solves
both of these issues and is the standard
for decentralized oracles
chain link is a framework for choosing
your decentralized network of nodes
and data providers to enable your smart
contract to reach their fullest
potential
chenning also has a number of other
functionalities that you can find out
more by going through the docs or
following along with these tutorials
with chain link we are leveraging the
same reliable decentralized
infrastructural
concept that makes blockchain work if
any nodes or api sources are
deleted hacked or depreciated the
decentrality of the network
will allow it to carry on and your smart
contracts will be safe
secure and reliable links in the
description will describe
even more detail about the oracle
problem and how chainlink solves it
all chain link code is open source so
feel free to dig around
make a pr and join the community now i
know we've gone over a lot of conceptual
pieces here but
they're really important to understand
in order to do any of the coding aspects
and a quick disclaimer in most examples
we're going to be calling from a single
centralized oracle
just to show you the functionality but
please when you move to a production
system
do not use a single centralized oracle
ever
now that we know how and why chain link
is such a powerful tool
let's dive even deeper into figuring out
exactly how to work with these apis
and make our smart contracts do really
interesting things i'll see you in the
next video
you
Ver Más Videos Relacionados
What are Oracles in Crypto? (Animated)
What is Blockchain?
What If I Have to Restart Learning Blockchain Development in 2024-2025 ❓
How does a blockchain work - Simply Explained
What Is A Crypto Bridge? | Blockchain Bridge EXPLAINED For Beginners
Akademi Hamster: Segala hal yang perlu kamu ketahui tentang blockchain
5.0 / 5 (0 votes)