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An oracle is an automatic program signing bitcoin transactions once a certain condition has been met.

An oracle is an automatic program signing bitcoin transactions once a certain condition has been met.

For example - Alice wants to send Bob a bitcoin if the weather is nice in Berlin in a week. Alice creates an 2 of 2 multisig address & transaction. One signature belongs to Bob, and one to an oracle. Once the condition is met, oracle publishes a signed transaction, and then Bob is able to withdraw money. In such a setup, an oracle cannot withdraw money by itself, nor can Bob.

For added security it's also possible to have multiple oracles guarding a contract, utilizing up to 8 of 15 signatures.

Further reading: