What Is the ‘Oracle Problem’ in Decentralized Finance (DeFi)?

The oracle problem is the challenge of securely and reliably bringing real-world data, such as asset prices or market information, onto a blockchain for use by smart contracts. Since blockchains are deterministic, they cannot access external data directly.

If an oracle provides incorrect or manipulated data, it can lead to the failure of a stablecoin's peg mechanism or the liquidation of positions.