Oracles in general refers to the collection of data in the database.
But in Blockchain it has some different meaning.In blockchain oracles refer as the external data provider.The data means real world off-chain data.
More specifically it acts like a bridge between real world data (off-chain)and blockchain.It helps to improve the efficiency of blockchain beyond on-chain.
Let's see why we need oracles,
Lets take the example that Ram wants to send some ethers to Sham.But additionally he wants to know about the price of ether and other cryptocurrencies.Here Ethereum blockchain is unable to get the price of those cryptocurrencies from outside the network.Then ethereum blockhain has to make api call to external data provider called as Oracle.
Here Oracles act as central system that provides the current price of those cryptocurrencies to ethereum blockchain.
one more example,If blockchain has Smart contracts related to the farmers insurance then for that blockchain needs the weather data.So again blockchain has to go beyond on-chain to get weather information.
In many ways Oracles are helpful to blockchain ecosystem to work efficiently with off-chain data.
But,remember the oracles are not decentralised one.They are not single source for the blockchain but they collect the data from real world.
So what if Oracles get compromise,or provided malicious data to blockchain.
Then their is no meaning for the decentralisation of blockchain. Because blockchain itself is being rely on central oracle to get information.This is commonly known as Oracle Problem.
That's it for now, we will meet on next part where we talk about different types of oracles and more.