The role of oracles in DeFi
2 min read
•
Feb 13
An oracle is software that finds and confirms data from the outside world (off-chain) and transfers it to the smart contracts on the blockchain (on-chain).
One particularly illustrative example is the transfer of information from exchanges and price aggregators to the smart contract controlling the liquidity pool. The information oracles transfer contains the prices of different cryptocurrencies represented in the liquidity pool. In a general sense, an oracle is any service that can transfer to the blockchain data it does not possess.
Oracles can be centralized (i.e. managed by one organization) or decentralized (managed by a DAO): the
