Database: The physical collection of files (data files, control files, redo log files) stored on disk that contains the actual data and metadata.
Instance: The combination of memory structures (SGA) and background processes that manage access to the database. An instance is what runs in memory and manages the database files.
Key Points:
One database can have multiple instances (RAC environment)
An instance can exist without a database being mounted
When you start Oracle, you start an instance, then mount and open a database
Rewriting in plainer words…
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