What are Bitcoin Oracles? New functionality on the Blockchain

Bitcoin oracles are external sensors that activate an intelligent contract on the blockchain and are currently experimental for the Bitcoin blockchain. The research is still in its nascent state, but the results are already impressive. It is worth noting that the oracles are not new to cryptospace, but the technology has never been used in the Bitcoin blockchain.

Bitcoin's oracles are the culmination of research at the Massachusetts Institute of Technology (MIT), where researchers are working to add new features to Bitcoin's capabilities.

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Imagine if you could send Bitcoins to someone when the stock market goes down, or the weather changes, or, how about if a post reaches a predetermined number of likes? All these features and many others are already possible thanks to the development of Bitcoin Oracles.

Oracles are already in use with many blockchain-based platforms such as Augur and Gnosis. Both of these platforms use oracles to monitor stock markets more precisely. These platforms are based on Ethereum. The researchers hope to provide the same services to Bitcoin users.

The MIT program is called " lit " and the researchers have already developed a working Bitcoin oracle to prove their theory. This oracle monitors the value of the USD and then automatically transmits the value in Satoshis to a smart Bitcoin contract. In a public interview, MIT researchers explained that they built the oracle to monitor the value of the USD, but could easily follow the cost of an action, the results of a football match or even time.

While MIT may have been the first developer to successfully create an oracle, the original concept of Bitcoin oracles was initially proposed by the Lightning Network developer Thaddeus Dryja year last during one of his discrete registers [19659002] concerning the scalability of Bitcoin and the lightning potential of the network.

Bitcoin Smart Contracts

Bitcoins could soon enjoy the benefits of complex intelligent contracts thanks to the creative minds of researchers like Alin S. Dragos and Tadge Dryja. Both of these researchers belong to MIT's Digital Currency Initiative. As part of this initiative, researchers are trying to create multi-layer smart contracts that use the Lightning network.

Second level protocols are an essential component of smart contracts. Ethereum has gained notoriety for having introduced the concept of intelligent contract for the cryptocommunity. To facilitate these smart contracts, Ethereum uses a second level protocol that behaves the same way. This protocol is called Raiden Network .

Working as a reliable data feed, Oracles is an essential part of multi signature contracts. Multi-sig contracts have predetermined funds set for release after receiving a certain amount of cryptocurrency.

Private Trusted Oracles

One of the key components of MIT's development strategy is the creation of oracles that can not track their users. In essence, oracles must be able to transmit data in a way that maintains the identity of private users. An oracle should not know if your information starts a smart contract.

A data mixing protocol makes anonymity possible. This protocol mixes the information from the oracles with the data provided before being placed on the blockchain. The researchers say they are able to determine which data they have added for mixing purposes but that the oracle is not able to distinguish between the two. In the future, organizations draw on this technology to protect their financial archives from prying eyes.

Types of oracles

The concept of blockchain oracles is not new and many other cryptocurrencies already use this technology to provide their users with stronger contracts. Let's take a moment to examine some of the different types of oracles that exist today.

Software Oracles

Software oracles monitor information online. The oracles trace elements such as temperature, gold prices, flight delays and even election results. The oracles are able to order the available online information and automatically extract the necessary data before sending the information to the smart contract.

Hardware Oracles

Hardware oracles trace objects in the real world as a ship reaching the port or a car that enters a particular area. These types of oracles require additional hardware sensors to complete these tasks. RFID technology could give these oracles a huge boost in capacity in the coming months. These devices offer users the ability to monitor complete supply chains via the blockchain.

Inbound Oracles

The incoming oracle uses external world input. Companies are looking for these oracles to set up automatic purchase orders upon completion of specific activities. For example, you can set a purchase order for crypto if, for example, gold prices increase.

Outbound Oracles

Outbound oracles allow intelligent contracts to release data into real-world objects. These oracles are now popular thanks to the rise of smart home technology. For example, an outgoing oracle unlocks a smart lock after completing an intelligent contract.

Consensus Oracles

Forecast-based platforms heavily use consensus-based oracles. These oracles collect information from numerous locations. They are perfect for monitoring that the financial markets are using a data source that may not be reliable.

Oracles Concerns

Bitcoin's concept of oracles proved to be effective in theory, but some concerns remain regarding the integration of these trusted sources. For one, no one has found a reasonable way to monetize oracles. For oracles to see adoption, incentives will be needed for those who host one.

In addition to financial concerns, centralization is a problem that needs to be addressed before large-scale adoption. What happens when a particular source hosts many oracles? How could this diminish the "trust" of network data? These are the questions that MIT researchers are facing while trying to turn their concept into one of Bitcoin's features.

Bitcoin Oracles – A work in progress

The Bitcoin oracle project continues to see improvements. Developers are looking for third parties to help with the user experience. MIT researchers have openly admitted that their main goal is protocol development, with the hope that stakeholders will come together to create a user-friendly platform to use technology in the future. Regardless of this, it seems that Bitcoin's oracles are here to stay.

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