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Oracle Problem

The Oracle Problem describes the as of yet unsolved problem of integrating external data into smart contracts on the blockchain. Regular Bitcoin transactions, which are a form of smart contract, mainly use data such as public keys, signatures, timestamps and block height, and these are reliable as their validity is objective and trustlessly provable via the blockchain.

However, incorporating external data, such as the score of a sports game, into a smart contract in a trustless manner is not yet feasible. There is currently no established method for guaranteeing that the information provided by either counterparty in a contract or a third party is legitimate. Several projects and schemes have attempted to minimize the trusted nature of the oracle.

Learn more about Discreet Log Contracts.