The Importance of Oracle Networks in Decentralized Finance (DeFi)

Here's a description of the role of Oracle Networks in the DeFi space that you can use on your blog:

Introduction

Among the several spaces that have been trending significantly for the past two years-decentralized lending protocols, stablecoins, yield farming platforms and more-stands one such, known as decentralized finance, or DeFi for short. Amongst some of the key components that make these DeFi protocols function, one such thing that stands out is the Oracle Network- a decentralized system which feeds real-world information to smart contracts. So what is an Oracle Network really, and what is the role it plays in the world of DeFi?

**What are Oracle Networks?

Oracle Networks are decentralized platforms interlinking the physical and digital world. These feed real-world data into smart contracts so that such contracts can take intelligent decisions. In DeFi, Oracle Networks power dApps requiring real world data to operate. Such dApps include decentralized lending protocols and stablecoins, among others.

**How do Oracle Networks work?

An Oracle network aggregates and verifies real-world information sourced from an interface such as APIs, web scrapers, sensor networks etc. This information is then passed on to the smart contract that then uses the information to make decisions. For example, a decentralized lending protocol might source current cryptocurrency price or interest rate by a national bank through an Oracle Network, which would verify that such data are true and reliable, tamper-proof in nature.

Oracle Networks in DeFi

Oracle Networks play a very significant role in DeFi. A decentralized application using real-world data will allow these roles to emerge:

1. Enable protocol of lending protocol: the oracle networks grant lending protocols the real-time interest rate and credit scores, which influence their lending decisions.
2. Good Support to a Stable Coin: On a generic level, the oracle networks supply information on how peg up stable coins in relation to fiat currencies based on live exchange rates and price feeds.
3. Better Yield Farming: Oracle networks will be able to empower yield farmers with highly informed decisions on which assets to farm when applying data related to real-time market conditions along with asset prices.
4. Resilience of systems against manipulation systems: Oracle Networks are those which prevent manipulation in DeFi markets as they ensure correctness and tamper evidence on data.