An oracle is a data source that connects smart contracts and other external sources in the context of blockchain.
An agent known as an oracle is one that not only interacts with external data sources but also confirms and authenticates the veracity of the data being delivered. As a result, oracles are in charge of giving crucial and trustworthy information to smart contracts, which in turn carry out certain duties.
Because blockchain smart contracts can only access the data that is present within their own digital network, oracles are crucial. As a result, oracles are required as a means of communication that “translates” non-deterministic data from real-world occurrences to digital values so that smart contracts can understand it in the form of deterministic data.
Oracles have enormous control over smart contracts since different functions will be carried out by them depending on the information provided by the centralized oracles. The conflict of trust that centralized third-party oracles introduce to trustless smart contracts and blockchain systems is what is referred to as the “Oracle Problem.” There are still many obstacles to be addressed because decentralized oracle networks are very challenging to build in a secure, useful, and trustless fashion, even if decentralized oracles like the consensus oracles may present a potential solution.
