How Do Decentralized Exchanges (DEXs) Provide Price Data to Oracles? ⎊ Path

How Do Decentralized Exchanges (DEXs) Provide Price Data to Oracles?

DEXs, particularly those using Automated Market Makers (AMMs), determine asset prices based on the ratio of tokens in their liquidity pools. Oracles can query these DEX smart contracts directly to retrieve the current pool ratio, which serves as the asset's spot price.

However, this on-chain price is vulnerable to immediate manipulation if the pool is shallow. Some oracles aggregate data from multiple DEXs to create a more robust, time-weighted average price (TWAP).

What Are the Main Types of Price Oracles Used in DeFi besides DEX-based Oracles?

How Does a Price Feed Oracle Differ from a Randomness Oracle in Blockchain Applications?

How Do DEXs Manage the Risk of Oracle Failure during a Black Swan Event?

How Does an Automated Market Maker (AMM) Calculate the Price of an Asset?

What Is a Time-Weighted Average Price (TWAP) and Why Is It Safer than a Spot Price?

What Is the Role of Time-Weighted Average Price (TWAP) in DeFi Oracles?

How Do Automated Market Makers (AMMs) in Derivatives Differ in Oracle Dependency from Order Book DEXs?

What Mechanism Do Decentralized Exchanges (DEXs) Use to Ensure Liquidity for TWAP Calculation?

Glossar

Decentralized Exchanges

Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.

Automated Market Makers

SystemArchitecture ⎊ Automated Market Makers represent decentralized trading protocols that utilize algorithmic functions, rather than traditional bid-ask order books, to facilitate peer-to-contract asset exchange.