Smart contracts can be an excellent tool – and we need strong oracle technology for them to be truly self-executing.
In 2008, Satoshi Nakamoto shook the world with the introduction of bitcoin to the masses. It has been a while since that time, and hundreds of other cryptocoins have emerged, trying to follow the example of bitcoin and win their place in the sun. However, the hype surrounding cryptocurrencies over the past few years is rapidly shifting to new technological innovations that were somewhat obscured by the glory of bitcoin.
The rise of blockchain
Blockchain, the technology that underpins cryptocurrencies, is predicted to have a much brighter future that reaches far beyond powering digital tokens. Blockchain's core principles – trust, transparency and immutability – have already been successfully put to use by key industries, including some major players.
Both huge corporations and companies of smaller scope are increasingly aware of blockchain technology and how it can impact the way they do business. Thanks to the adoption of blockchain, companies have been able to automate and perfect numerous processes, reduce costs, and solve distrust issues, both within and beyond company walls.
It is important to keep in mind that blockchain technology is still maturing, meaning it may bring even more value in the long run. There remains a lot to be improved before blockchain realizes its full potential. One important issue on the table is the connectivity problem of blockchain's smart contracts.
What are smart contracts?
Offered over 20 years ago but only recently becoming realistic upon the launch of Ethereum, the concept of smart contracts is about to revolutionize industries that rely on traditional legal agreements. Smart contracts are self-verifying and self-executing digital contracts written in code and existing on blockchain. Normally, their execution is triggered either by a deadline or by an event online or in the real world.
In the simplest scenario, a smart contract executes itself when a certain deadline is met. But things get more complicated when a smart contract is required to get information about events from outside the blockchain. Due to blockchain's particular features, smart contracts are not enabled to connect to off-chain resources such as data feeds and APIs on their own, and this creates obstacles.
The oracle solution
The only way the connectivity problem can be resolved is by means of so-called oracles. Without these pieces of middleware that connect smart contracts to the real world, it is hard to imagine a useful smart contract. The major restraints lie in the scarcity and insufficient quality of such solutions.
Fortunately, companies like SmartContract are making inroads toward building better oracles. With oracles, smart contracts have a powerful potential to revolutionize whole industries, especially those relying on financial agreements. These agreements are not possible without data input and payment output, making the problem of connectivity the number one concern of CEO Sergey Nazarov and the SmartContract team.
The idea of smart contracts replacing the lion's share of traditional agreements is becoming a reality, thanks to the first decentralized oracle network called LINK. It provides a smart contract with access to any external resource whose data is needed to trigger self-execution, with no need for manual actions on the part of either contracting party and no need to involve lawyers. Any key data provider can become a part of this network and sell information directly to smart contracts that interact with them. These actions serve to strengthen the network's decentralization and data accuracy.
The bottom line
With blockchain, smart contracts, and many startups such as Stampery, Filament, Chronicled and Opporty seeking to extend the benefits of new technologies to the masses, oracles will continue to escalate in importance. The advent of oracles guarantees that blockchain and smart contracts will be put to much wider use in the future, even though they are presently somewhat limited in their capabilities.
Of course, it is impossible to revolutionize the way industries operate with a snap of the finger. Dramatic changes take time; they may be painful, and not every industry sees blockchain and smart contracts as necessary reforms. However, blockchain is an incredibly powerful catalyst that is guaranteed to change the future of business.