Oracles are entities that provide external data to blockchain networks, bridging the gap between the blockchain and the real world. Since smart contracts on blockchains cannot access data outside their network, oracles serve as data feeds that supply this necessary information, such as temperature readings, stock prices, or flight statuses. This enables smart contracts to execute based on real-world events and conditions.

Oracles can be centralized, relying on a single data source, or decentralized, aggregating data from multiple sources to ensure reliability and accuracy. They play a crucial role in expanding the use cases of smart contracts and decentralized applications (DApps) beyond just transactional purposes, allowing them to interact meaningfully with the external world.

“In a project I worked on, we used an oracle to feed live market prices into a blockchain-based financial application, enabling it to execute trades automatically when certain market conditions were met.”