Centralized Oracle Failure

Definition ∞ Centralized oracle failure describes a situation where a single data source providing external information to a blockchain becomes unavailable or corrupt. Oracles act as bridges between off-chain data and on-chain smart contracts. A centralized oracle represents a single point of data origin, making it vulnerable to manipulation, downtime, or inaccuracies. Such a failure can compromise the reliability of smart contracts that depend on this external data, leading to incorrect execution or financial losses within decentralized applications.
Context ∞ The primary discussion surrounding centralized oracle failure concerns the security and reliability of decentralized finance protocols. Many DeFi applications rely on oracles for price feeds and other critical data, making their integrity paramount. The industry is actively working towards more robust, decentralized oracle solutions to prevent single points of failure and enhance overall system resilience.