In a Financial Derivative, What Is the Role of the "Oracle" in Relation to the Strike Price? ▴ Learn

In a Financial Derivative, What Is the Role of the “Oracle” in Relation to the Strike Price?

An oracle is a third-party service that provides real-world data, such as an asset's price, to a smart contract on the blockchain. In a decentralized derivatives contract, the oracle is crucial for determining the settlement condition.

For example, it provides the final asset price needed to compare against the strike price at expiration, triggering the contract's payout logic. The oracle's data integrity is paramount for the contract's financial fairness.

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