What are Blockchain Oracles

Everything you need to know about blockchain oracles, their importance and benefit for blockchain, the structure of oracles which consists of different components as well as their types and the list of oracle developers

You know everything about blockchain and its types from our previous articles. You also may have heard about blockchain oracles, and today we want to provide you with the detailed explanation of them. What they are, how they work, why they are important and how to distinguish them by components and types.

Blockchains, due to their decentralized governance and distributed maintenance, are a great place to host smart contracts. Smart contracts are digital agreements that execute themselves once specified conditions are met. Sometimes these conditions are based on information from the physical world. Oracles are third-party software that collects real-world data and processes it in a way that blockchains and smart contracts can understand and act upon.


Let’s say Peter and Jane want to make a bet on tomorrow’s temperature. Peter says it is going to be 20°C or higher, Jane thinks it will be 19°C or lower. They design an appropriate smart contract that will turn to the specified oracle for information on tomorrow’s temperature. Peter and Jane both send money to the contract and wait. Next day the oracle takes data from meteorological websites and converts into blockchain-readable format. The smart contract then sees that today’s temperature is 21°C. According to its code, the smart contract decides that Peter wins and send both Peter and Jane’s money to him.


Oracles are essential for any smart-contract platform as they connect real and digital worlds. Blockchain technologies will not see mass adoption if they exist in a closed or restricted environment. Though there is still a lot of research that needs to be done in this area, oracles are already helping blockchains find real-world use and applications.


Oracles consist of three components: data source, query, and data processing. First of all, an oracle needs a source of information, such as meteorological resources or stock markets. To collect data, an oracle submits a query, a request for information. After receiving it, the oracle uses its algorithms to process it so that smart contract can read it.


According to their operation, oracles can be software or hardware. Software oracles interact with data accessible online. For example, weather, stock prices, plane schedules, dates of events, and so on. Software oracles gather data from websites and send it to smart contracts. Hardware oracles get their information from various physical sensors and RFID tags. They will let a smart contract know if a cargo truck is in the range of a sensor. Hardware oracles are usually used in logistics or supply chain management.

Oracles can also be incoming or outgoing. Incoming oracles receive data from an off-chain source and transmit it to a smart contract. Outgoing oracles, as you may have guessed, gather on-chain data and send it to the outside world.

Oracle developers

Oraclize offers an honest extraction of data by providing cryptographic evidence, which corresponds to the received data. Chainlink is working on creating a network of oracles, thus facilitating the practical use of smart contracts. Blocksense is a company that renders many services including the development of smart contracts that support oracle archives.

Related news

Lawsuit by Oracle Corp claims trademark violation by VC firm CryptoOracle

Oracle Corporation et al. v. Crypto Oracle LLC, et al., Case № 3:19-cv-04900 (N.D. Cal. filed August 15, 2019)[NMR] Brands, brands, brands. We’ve talked about the importance of brands here at the Crypto Caselaw Minute many times now. This new case is a lawsuit alleging federal trademark infringement; federal trademark dilution; unfair competition; cybersquatting; and state trademark infringement and dilution, that was filed by a small company you may have heard of… Oracle. Okay, not that small of a company. Before we discuss the particulars of this case it is worth talking a little bit about famous marks. In the United States, the Lanham Act states that a trademark “ is famous if it is widely recognized by the general consuming public of the United States as a designation of source of the goods or services of the mark’s owner.” The key part there is “widely recognized.” How do you determine if a trademark fits this profile? Well, per the Lanham Act, a court would consider the following when determining if a trademark is famous: 1) The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties. 2) The amount, volume, and geographic extent of sales of goods or services offered under the mark. 3) The extent of actual recognition of the mark. 4) Whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register. Some example famous marks would be: Google, Microsoft, IBM, Exxon Mobil, Apple, you get the picture. Mega companies marks are treated differently than other marks. The plaintiff in this case is the company Oracle. A mega company with lots of trademarks. This is relevant to this case, because you can only bring a trademark dilution claim, which is one of the claims in this lawsuit, under federal law if your mark is famous. Given this fact the complaint contains a cornucopia of information to convince anyone reading that Oracle’s marks are famous. Okay, so who is Oracle suing, and why? The defendants in this case are a Delaware based company, Crypto Oracle LLC, and its founder Louis Kearn. Crypto Oracle was founded in 2017 as a VC firm "focused on supporting and advising companies building distributed ledger technologies.” The complaint has examples of the websites that Crypto Oracle used with oracle in the domain name, as well as an ample supply of screenshots from social media postings showing Crypto Oracle using the word oracle, ie the name of the company. Okay, fine, but what does that have to do with Oracle? Well, Oracle is in the blockchain biz. As the complaint says “[a]s a worldwide leader in technology solutions, Oracle’s resources, infrastructure, technology, and expertise allowed Oracle to become an early adopter and provider of blockchain solutions and products to its customers.” In addition, attached to the complaint are copies of Oracle’s blockchain platform, and advertising material related to their blockchain platform. When Oracle found out about Crypto Oracle they proceeded to send cease and desist letters to Crypto Oracle asking them to change their name. How did Crypto Oracle respond? The complaint alleges, “[d]efendants’ response –including Mr. Kerner’s application to register CRYPTOORACLE despite actual notice of Oracle’s registered and common law trademark rights — necessitated this action.” As a general rule, you really shouldn’t file for a trademark that seems similar to trademarks that you received a cease and desist letter for. It will be interesting to see the defendant’s response to the complaint, but this doesn’t look great for Crypto Oracle. One open question that may trip up Oracle Corporation down the road is the prevalence of oracles, the concept, in the blockchain space. Given the potential of oracles, the concept, and the inevitability of the word “oracle” showing up in company names and products, we may be seeing lots more suits from Oracle the company in the future. Disclaimer: Crypto Caselaw Minute is provided for educational purposes only by Nelson Rosario (@nelsonmrosario) and Stephen Palley (@stephendpalley). These summaries are not legal advice. They are our opinions only, aren’t authorized by any past, present or future client or employer. Also, we might change our minds. We contain multitudes.  As always, Rosario summaries are “NMR” and Palley summaries are “SDP”.  
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