An oracle is a service that provides external, real-world data to smart contracts on a blockchain. Since blockchains cannot access off-chain data directly, oracles serve as bridges.
Types of oracle data: Price feeds for DeFi, weather data for insurance, sports results for betting, random numbers for gaming, and real-world events for prediction markets.
Oracle problem: Blockchains are deterministic, external data introduces trust assumptions, decentralized oracles reduce single points of failure, and data accuracy is critical.
Leading oracle providers: Chainlink (market leader), Band Protocol, API3, Pyth Network (Solana focus), and UMA (optimistic oracles).