The Oxford definition of an "oracle" is "a priest or priestess acting as a medium through whom advice or prophecy was sought from the gods in classical antiquity." So what's the connection between oracles and smart contracts?

If we take a basic smart contract, what is does is very similar to an "IF-THEN" condition. For example, a software retailer may have an Ethereum smart contract where it states "IF I receive 0.1 Ether, THEN I will send a license key to the sender." This example is very easy for an Ethereum smart contract to execute as the "IF" condition takes place within the Ethereum blockchain and is easily verifiable.

Now what if you want to use transform a will into an Ethereum smart contract? "IF I am dead, THEN transfer all the ETH in my wallet to the following 3 wallets." Now you have a slight problem, while the Ethereum smart contract will not have any problems transferring the ETH out, how in the world will it know if you are dead? This is where an Oracle comes in.

A cryptocurrency Oracle is an agent trusted by the blockchain/smart contract to provide reliable and accurate reporting of events. For the purposes of our "will smart contract", perhaps there is an Oracle agent that scours through death registries to check for information matching the details of the smart contract owner. Once it is found, the Oracle agent then publishes a message to the smart contract to trigger the IF condition and allow for the ETH to be transferred out.

I hope this gives you a basic idea of a cryptocurrency Oracle and how it can be essential for certain smart contracts. Do feel free to leave comments!