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What is the Oracle in Polkadot, and what are the uses as an oracle?

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The oracle machine was first proposed by Turing. A black box that can be called Oracle is added to the Turing machine to form an Oracle Machine, which can input information into the Turing machine system to help the Turing machine complete operations. In reality, Oracle is more understood as a good source of information.

In addition, Oracle also has the meaning of oracle. The word comes from Greek mythology. It is said that when the people are in trouble, they will ask the gods for oracles, and the gods will make suggestions or prophecies for the people to help them solve question.

The oracle also has a similar role to the oracle, it is the data linker between the blockchain and the outside world. The oracle is a bridge between on-chain and off-chain information interaction, which can help the blockchain obtain off-chain data.

Essentially, it is a middleware for data invocation and access. It solves the decision-making problem of “yes or no” and the functional problem of “how much data”, thereby realizing the access of external data by smart contracts and call.

In a blockchain context, oracles are a way of bringing real-world data onto the blockchain so that it can be used by decentralized applications.

Oracles serve a variety of purposes for application builders. E.g:

1. Most stablecoin designs use oracles to bring in asset exchange rate data in order to tie their value to real-world currencies.

2. Synthetic assets use oracles as price information to determine whether the underlying Crypto is sufficient to secure debt positions.

3. Prediction markets use oracles to determine the outcome of real-world events and determine the payout for the predicted share.

4. Decentralized insurance markets use oracles to obtain information on whether claims are valid.

Oracle solutions range from centralized trusted ones to decentralized game theory based ones. On the centralized end, an oracle can be a single account that has the power to determine the real data on-chain.

On the decentralized end, a complex game of "cowards" can be played between the various stakeholders at stake, who risk being slashed if they don't submit the same data as everyone else.

Solutions such as Chainlink are in the middle, allowing the level of trust in oracles to be adjusted to your preference.

A ChainlinkFeed Pallet was recently released to allow smart contract applications in Polkadot to access price reference data, available in the form of a Substrate oracle Pallet.

When using oracles in your application, you should understand the benefits and risks associated with their specific model. As the Polkadot ecosystem grows and oracle parachains emerge, this article will continue to be updated, comparing different solutions and the pros and cons of each.

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