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An oracle is any entity or device that connects a deterministic blockchain with off-chain data (and vice-versa).

Oracles are used to provide external data to the smart-contracts. They serve as a middleware between the blockchain and the external APIs.

The oracles enter every data input through an external transaction.

The oracles solve api-connectivity-problem.

However, they are prone to the single-point-of-failure problem.

Keep in mind

Oracles and data providers are not the same thing. Confusingly, sometimes that is the case: a company that provides a data stream will themselves act as the oracle delivering that data to a user directly.