What Is the “Oracle Problem” in the Context of Blockchain Technology?

The "oracle problem" is the challenge of securely and reliably getting real-world, off-chain data, like asset prices or event results, into a decentralized, on-chain smart contract. Blockchains are deterministic and isolated, meaning they cannot natively access external information.

Oracles are third-party services that provide this data feed. The problem is ensuring the data is accurate, tamper-proof, and trustworthy, as a compromised oracle can lead to faulty smart contract execution.

Solving this is vital for decentralized finance (DeFi).