Trading & AMMs
Price Oracle
Oracle supplying asset prices for collateral and settlement
Definition
A price oracle supplies asset valuations to contracts for collateral limits, liquidations or derivatives. The feed’s market coverage, update rules and quote units determine what its price means; neither an aggregator nor a TWAP is a guarantee against bad input.
Example
With a hypothetical ETH/USD oracle at $2,000, 2 ETH is valued at $4,000. At an 80% liquidation threshold and $3,000 debt, health factor is 4,000 × 0.8/3,000 = 1.067. A report of $1,800 lowers it to 0.96.
How it works
A feed publishes a price derived from observations, aggregation or onchain history. The consumer checks freshness and units, then applies that value to risk calculations; some feeds aggregate many sources while others do not.
Risks to Consider
- A manipulated thin market can inflate collateral valuations
- Stale updates can postpone or wrongly trigger liquidation
- Wrong decimals or quote currency can multiply valuation errors
Common Questions
How is a price oracle different from an oracle?
Oracle is the broader category of external information delivery. A price oracle specifically reports asset values; its output is not necessarily the price you can execute for a large trade.
