Definition ∞ A smart contract or agreement where one or more parties rely on an external entity or protocol for a specific function or data. This arrangement introduces a dependency on an outside service for execution, oracle data, or custodial functions. It can simplify complex operations but also introduces potential points of failure or centralization. Understanding these dependencies is key for risk assessment.
Context ∞ Third-party contracts are common in decentralized finance, particularly for oracle services, lending protocols, and cross-chain bridges. Debates center on the security implications of relying on external components and the mechanisms for dispute resolution. Future efforts aim to minimize trust assumptions through verifiable computation and decentralized oracle networks, reducing reliance on single points of control.
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