# Before we dive into oracles, there is one concept that you should be familiar with that will help you understand why oracles even exist and that concept is [smart contracts](https://www.youtube.com/watch?v=ZE2HxTmxfrI)

https://youtu.be/CxbtHcY44H0

**Smart contracts are computer programs that execute once defined terms have been met.**
Once smart contracts are set on a blockchain they too become immutable and transparent. They eliminate third parties for complex transactions and in that way they prove to be a cost effective and time efficient alternative for a broad spectrum of transactions like legal agreements and automated payments for example. 
[source](https://blockonomi.com/oracles-guide/)

In order for smart contracts to reach their highest potential and be most effective, they will require data that is found outside of the blockchain with which they are associated. This is also how smart contracts and that particular blockchain will become increasingly relevant and have more use cases. 

This is where oracles step in and issues sprout. The issues stem from this combination of on-chain and off-chain information and  interaction and whether or not oracles can be trusted. Ideally they would be trustless much like the blockchains to which they are supplying the information. 

Common ways that oracles obtain outside information include website APIs and market data feeds. 


One phrase you may run into if you chose to research this topic further is: Deterministic; which “In mathematics, computer science and physics, a deterministic system is a system in which no randomness is involved in the development of future states of the system.[1] A deterministic model will thus always produce the same output from a given starting condition or initial state.[2]” 
[source](https://en.wikipedia.org/wiki/Deterministic_system)

*This is relevant with blockchain and oracles because while the prior is deterministic, the latter is the link between it and the nondeterministic world.*

# How oracles are created and organized ought to be highly scrutinized because they have a lot of power over the smart contracts with which they work. 
The oracles ultimately determine how the smart contracts execute. If the information they are providing is tampered with, the smart contracts relying on them can quite effectively become compromised as well if the oracle nodes aren’t decentralized.

One popular project that is focused on this is ChainLink. Again, this is not a paid promotion of ChainLink by any means. I’m speaking about it specifically because it’s popularity is growing and I think it’s important to understand what it’s based on and it’s potential vulnerabilities.
Another platform that utilizes oracles is Augur and its prediction markets. Augur is a bit different in that the data that its oracles utilize originates from the consensus established by the people on the platform.

If you’re curious about oracles and want to get deeper into this subject and read what some expert blockchain developers think of oracles, check out Nick Szabo’s blog called [Unenumerated](https://unenumerated.blogspot.com/), and also a [pessimistic article](https://medium.com/@jimmysong/the-truth-about-smart-contracts-ae825271811f) written by Jimmy Song.


# Additional Reading/Links:

[Explanation of Oracles in Crypto](https://blockonomi.com/oracles-guide/)

[If you want to dive deep into the history of smart contracts, check out the blog from the man who first had the idea: Nick Szabo and his blog HERE](https://unenumerated.blogspot.com/)

[Deterministic definition](https://en.wikipedia.org/wiki/Deterministic_system)

[Smart contracts](https://www.youtube.com/watch?v=ZE2HxTmxfrI)

[Smart contracts and Ethereum](https://www.youtube.com/watch?v=mZaxOhzS4EQ)