IOTA introduces Oracles – important for future smart contracts

IOTA is preparing to introduce Oracles, i.e. the automated feeding of real-time data into the Tanglenet also from external sources. Oracles serve as the basis for smart contracts, for example, which are expected to come to IOTA in 2021.

So-called oracles have become a hot topic in the crypto industry since the DeFi boom at the latest. This is because external data is also often important for decentralized transactions via smart contracts, such as the prices of various cryptocurrencies in real time or sports results for betting transactions. Such data is processed by Oracles in a blockchain-compatible manner and fed into the ecosystems of cryptocurrencies. So IOTA also needs Oracles and wants to develop its own solutions in the process, as a blog post from the IOTA Foundation explains.

Oracles at IOTA – this is how they are supposed to work.

A typical question with Oracles is how to ensure that the external data is not manipulated on its way into the blockchains. Here, IOTA wants to rely on the “First Party Oracle” principle, meaning the data source is directly connected to the Tanglenet. In the Internet of Things (IoT), the main focus of IOTA, such data sources can be sensors that measure consumption volumes or collect other data, for example. However, IOTA is already announcing a collaboration with Kaiko as an example of its oracles. Kaiko is one of the world’s leading providers for capturing and providing crypto prices. A demo for Kaiko Oracles at IOTA is available here.

IOTA sees its Oracles in Tanglenet as fee-free, high security and the option of even large amounts of data as decisive advantages over existing solutions. However, it remains important: Oracles only show their full benefit in combination with smart contracts or DApps, and IOTA is still developing support for such functions. Nevertheless, the way IOTA envisions its Oracles is charming and can be easily understood in this video:

Conclusion: are IOTA Oracles even attacking Chainlink?

In 2020, Chainlink (LINK) has established itself as the leading Oracle solution in the crypto industry and is currently hard to imagine the top 10 cryptocurrencies without it. Graph Protocol (GRT), meanwhile, is gaining ground with the concept of cleverly indexing data already present in Ethereum’s blockchain to add value. IOTA Oracles will have to measure themselves against such solutions, but without Oracles, a future IOTA 2.0 would only be piecemeal.

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