Oracles in the blockchain context are third-party services that provide smart contracts with external information, enabling them to execute transactions based on data that originates outside their native blockchain networks. This external data can include anything from price information, temperature readings, successful payment confirmations, to other real-world inputs necessary for the smart contracts to perform their functions accurately.

Since smart contracts operate in a decentralized environment and cannot access external data directly, oracles act as bridges between the blockchain and the real world. However, relying on oracles introduces a point of potential centralization and vulnerability, as the integrity of the smart contract's execution depends on the trustworthiness and reliability of the oracle's data. To mitigate these risks, decentralized oracle networks and mechanisms for verifying the authenticity of the data have been developed, enhancing the security and functionality of smart contracts in decentralized applications.

On Colony, oracles can be used to run certain smart contracts locally, such as the Reputation Oracle.

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