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Oracles are data feeds from external systems that feed vital information into smart contracts.[1] A common example of an oracle is the provision of the event result (for example, from a football game) that is used in a betting contract where the parties who are wrong lose all of their cash and the winners receive a pro-rata share of the total of all bets. The oracle is the term for both the source of the information as well as the feature in the contract program that inputs the information into the program. In the football example the oracle would be the National Football League as well as the data feed into the smart contract program.

Depending on the type of smart contract, the oracle can be software based or hardware based (as from weight, temperature, etc sensors). The term oracle is used for both the inbound and outbound interfaces of smart contracts. An outbound oracle might, for example, unlock access to a website once a payment is made, the information about which would have come via an inbound oracle.[2]