What Is a ‘Contingent Claim’ and How Is It Settled by an Oracle?

A contingent claim is a financial contract whose value and payoff depend on the outcome of a future uncertain event. Derivatives like options and binary options are types of contingent claims.

An oracle is the sole source of truth for the event's outcome. Upon the event's conclusion, the oracle submits the verifiable data, which triggers the smart contract to execute the pre-defined payoff logic, thus settling the claim.