Definition ∞ A price oracle is a digital service that provides external price data to smart contracts on a blockchain. Since blockchains are deterministic and isolated systems, they cannot inherently access real-world information like current asset prices. Oracles act as a bridge, fetching and verifying price feeds from various sources to ensure smart contracts can execute based on accurate, up-to-date market data. They are critical for decentralized finance applications.
Context ∞ The context for price oracles often appears in news related to the security and reliability of decentralized finance (DeFi) protocols. Discussions focus on the potential vulnerabilities of single-source oracles and the development of decentralized oracle networks to mitigate these risks. Key considerations include data accuracy, tamper-resistance, and the economic incentives that ensure oracle integrity.
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