There are many use cases for off-chain data in smart contracts. Here are some examples:
Buying and selling virtual goods inside a game and trading it on a blockchain or using location data to unlock a new level requires a connection to off-chain events. Oracles come in handy here too.
A data market simply provides (sells) data without caring about its use or who’s buying it. This information can be related to customers, the weather, the economy, and even machine operating parameters. In this sense, oracles that act like a data market are useful to increase the trustworthiness of the provided data. How? By verifying it.
Buy and sell rates from other markets are needed for smart contracts to make profound pricing decisions, and data is also important to assess the customer’s credit risks.
When resolving a prediction market, off-chain data about the outcome of the predicted event is necessary, and oracles can provide that.
This is yet another use case for an oracle, where data regarding consumption is essential. Renewable energy is a good example: wind power stations, solar panels, and plants are becoming more and more popular. Records of produced and consumed energy have to be recorded and made available to the underlying smart contract.
Oracles can also be used to improve the data quality in a supply chain and aid in its mass-market adoption. Applications could be customs declarations, location services with automatized payment, transport insurances, and much more.
A reliable data source is crucial for insurances. It can bring great benefits in the case of smart contracts, by automatically calculating insurance premiums and releasing the amount in case of a loss.
In sum, there are countless use-cases for oracles. Although blockchains can deliver and store almost any kind of data, there is still the need to connect both on-chain and off-chain worlds. Oracles act as the connecting piece, delivering necessary – sometimes live – results to the on-chain layer.