Oracle
A service that brings outside information, such as a price or an event outcome, onto a blockchain so contracts can use it.
Because a virtual machine must be deterministic, a contract cannot call an external service, so any external fact has to be written on chain by someone and signed. Designs range from a single publisher with one key to networks of independent node operators aggregating signed reports, as with Chainlink and Pyth, and the safety of everything built on top depends on how hard that reported value is to move. Lending protocols use price oracles to decide when a loan is undercollateralized and must be liquidated, so a manipulated price causes real, immediate, irreversible transfers; the 2022 Mango Markets exploit worked this way, by pushing the thinly traded market price that the oracle faithfully reported. Defenses include time-weighted averages, multiple independent sources, and deviation limits, none of which make the underlying data true.
In practice
Using a spot price from a single thinly traded venue as an oracle allows an attacker to move that price and trigger liquidations or borrow against inflated collateral.
The common misunderstanding
An oracle does not verify that data is true; it attests to what a source reported, so a manipulated market or a compromised publisher becomes on-chain fact.