What Is the Role of an ‘Oracle’ in Linking Real-World Events to a Smart Contract?

An oracle is a third-party service that provides external, real-world data to a smart contract, enabling it to execute based on conditions outside the blockchain. For options trading, an oracle might provide the settlement price of an asset at expiration.

They act as the bridge between off-chain information (like stock prices or weather data) and the on-chain execution logic. Decentralized oracle networks mitigate the risk of a single point of failure and data manipulation.