What is the Primary Role of Oracle in Blockchain?

Apr 19, 2025

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Ibiam Wayas

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An oracle in blockchain technology is a third-party service that connects blockchains to external systems, allowing smart contracts to execute based on real-world data and events.

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Smart contracts on blockchain inherently lack the ability to access data from the outside world - things like weather reports, stock prices, sports scores, or the outcome of an election. 

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Oracles act as bridges that bring this off-chain information onto the blockchain in a verifiable way, making it usable for smart contracts.

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Oracles significantly expand the potential use cases of blockchain technology. Without them, smart contracts would be limited to operating only with on-chain data.

Why are oracles important?

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However, oracles are not all that perfect solution. One big issue associated with oracles is the “oracle problem.”

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Oracle problem refers to the difficulty of ensuring the trustworthiness and reliability of the data provided by oracles. If an oracle is compromised or provides inaccurate information, it can lead to the flawed execution of smart contracts.

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Various approaches are being developed to address the oracle problem and enhance the security and reliability of off-chain data, including decentralized oracle networks (DONs).

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