Smart contracts, the basic building blocks of the blockchain world, don’t have default access to real-world data so to be able to complete complex logic executions once they often need off-chain data to make decisions, such as temperature/weather or the price of an asset
This on-chain off-chain data communication is necessary to enable complex decision making, and has use cases in finance, exchange services, predictions, gaming and so many more fields!
Decentralized finance (DeFi) relies on accurate, verifiable data. Derivatives, insurance, and trading all require external inputs to function. Oracles fuel smart contracts with the information they need to execute, converting off-chain data into an accessible format. If a smart contract needs to know the value of an asset, that data is delivered by an oracle. The accuracy and relevance of the data determine the value of the smart contract, whatever it is used for.
If the data is wrong as the result of manipulation or simply wrong implementation, the smart contract loses its value.
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