An Oracle in the context of trading refers to a third-party service or system that provides real-world data or information to a smart contract on a blockchain. This information can be used to trigger specific actions within the smart contract, such as executing trades or updating the value of a financial instrument.
In the world of decentralized finance, Oracles are essential components as they bring external data into the blockchain ecosystem and provide transparency, trust, and automation. For example, an Oracle can provide price data for a specific asset, allowing a decentralized exchange to automatically execute trades based on the current market price.
In summary, an Oracle acts as a bridge between the traditional financial world and the decentralized world, providing critical information that allows smart contracts to make automated decisions.