How Do ‘Oracles’ Contribute to the Functionality and Security of a DEX?

Oracles are third-party services that provide external, real-world data, such as asset prices, to smart contracts on the blockchain. For a DEX, especially one dealing with derivatives or complex assets, oracles are crucial for providing accurate and unmanipulable spot prices for settlement, liquidation, and pricing calculations.

They ensure that the smart contract logic is based on current and correct market information, preventing price manipulation.