Price Oracle
A mechanism providing real-time price data for digital assets in DeFi protocols.
What is Price Oracle?
Price oracles, like Chainlink or Uniswap TWAP, deliver accurate, on-chain price feeds for assets used as collateral or loans in DeFi lending. They prevent manipulation by aggregating data from multiple sources. For example, Aave relies on Chainlink to value ETH collateral, ensuring liquidations occur at fair market prices. In 2025, oracles support over 500 asset pairs across major protocols.
Oracles are critical for risk management, as inaccurate prices can trigger premature liquidations or allow undercollateralized loans. In 2023, a Chainlink outage briefly disrupted $50 million in loans, underscoring the need for decentralized oracle networks. Advanced oracles now incorporate redundancy to enhance reliability.
Related Terms
Liquidity Pool (Perp Dex)
A pool of digital assets provided by users to facilitate trading on a Perp DEX.
Mining and Miner
Mining is the process of validating transactions and adding new blocks to a blockchain by solving computational puzzles, and a miner is who performs this task to earn rewards.
Liquidity Fragmentation
The dispersion of liquidity across multiple pools, chains, or exchanges, leading to inefficient pricing and higher costs.
Money Markets
Financial markets for short-term borrowing and lending, typically under one year, involving instruments like repos, commercial paper, and CDs.
Matching Engine
The algorithm that pairs buy and sell orders in exchanges based on rules like price-time priority.
Maintenance Margin
The minimum collateral required to keep a leveraged position open.