An oracle is a service that feeds external (off-chain) data into a blockchain, allowing smart contracts to interact with real-world events. For example, an oracle can supply asset prices, weather data, or election results to a decentralized app.
Blockchains are inherently closed systems—they can only access data that exists on-chain. Oracles act as a bridge between off-chain and on-chain worlds. Without them, DeFi applications like lending protocols and synthetic asset platforms couldn’t function.
Well-known oracle providers include Chainlink and Band Protocol. They use decentralized networks of data sources to minimize the risk of manipulation. Still, oracle reliability remains a security concern, as tampered data can trigger massive losses in automated smart contracts.
