What Is the “Oracle Problem” in the Context of Smart Contract Security?

The oracle problem is the inherent challenge of securely and reliably getting real-world, off-chain data onto a blockchain for smart contract execution. Blockchains are deterministic and isolated, so they cannot access external data themselves.

The security of the entire smart contract often hinges on the security and integrity of the external data source (the oracle), which introduces a necessary, yet external, point of trust.