An oracle is a service that fetches information from outside the blockchain and feeds it into smart contractsSmart contractA program that runs on a blockchain and automatically carries out what it was written to do once certain conditions are met.. Smart contracts can't read websites or data feeds on their own. They need an oracle to know, for example, what Ether (ETH)Ether (ETH)The currency of the Ethereum network, used to pay network fees, as a stake under proof of stake and to send value between people. costs in US dollars.
How does an oracle work?
The oracle collects data, such as prices from many marketplaces, and records it on the blockchain. Smart contracts can then read that data and act on it.
Some examples:
- Lending. A lending service in DeFiDeFi (decentralised finance)Financial services, such as lending, saving and trading, that run on smart contracts on a blockchain instead of through a bank or other middleman. needs the market price of the collateral to know when a loan has fallen below its limit.
- Insurance. A smart contract that sells insurance needs information on things like weather or natural disasters.
- Games and lotteries. Oracles can generate random numbers that nobody can predict.
ChainlinkChainlink (LINK)A network of oracles that bring outside information, such as prices, into smart contracts. LINK is an ERC-20 token on Ethereum, with 1 billion in total. is an example of a decentralised oracle network, and LINK is its token.
Why does it matter?
A smart contract is only as reliable as the data it receives. This is known as the oracle problem. If a single party runs the oracle and makes a mistake or gets hacked, the contract runs on bad data.
That is why many oracles gather data from many independent sources, which makes the result harder to fake. DecentralisationDecentralisationWhen power and responsibility are spread across many participants, instead of one bank, company or government controlling a system. matters just as much for the oracle as for the blockchain itself.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.