How Do Oracles Ensure Accurate Collateral Valuation in a DeFi Protocol?
Oracles are decentralized services that feed real-world data, such as asset prices, into smart contracts. They are crucial for DeFi protocols to accurately determine the value of collateral and debt.
By using multiple, aggregated data sources, oracles minimize the risk of a single point of failure or price manipulation, ensuring fair liquidation.
Glossar
Accurate Collateral Valuation
Valuation ⎊ Accurate collateral valuation is the precise determination of the real-time market worth of assets pledged as security for a leveraged position in derivatives trading.
Oracles
Attestation ⎊ Oracles function as critical infrastructure within decentralized finance, bridging the gap between on-chain smart contracts and external data sources to enable complex financial instruments.
DeFi Protocols
Function ⎊ DeFi protocols, or Decentralized Finance protocols, are autonomous applications built on blockchain technology that replicate traditional financial services without intermediaries.