How Do Oracles Feed External Price Data to Smart Contracts?
Oracles are third-party services that provide smart contracts with verified, real-world data, such as the current market price of collateral assets. They are crucial because blockchains cannot natively access off-chain information.
Oracles aggregate data from multiple sources, sign it cryptographically, and transmit it on-chain, allowing the smart contract to accurately execute functions like liquidation based on the true market price.
Glossar
Oracles
Attestation ⎊ Within decentralized finance and sustainable blockchain ecosystems, attestation functions as a critical oracle service, verifying off-chain data integrity and provenance for on-chain smart contracts.
Smart Contracts
Function ⎊ Smart contracts are self-executing agreements with the terms of the agreement directly written into lines of code, residing on a decentralized ledger.
Data Feed
Source ⎊ A data feed in financial derivatives is the continuous stream of market information, such as price, volume, and order book depth, originating from exchanges and liquidity venues.
External Price Data
Source ⎊ External price data refers to the off-chain market information, such as the spot price of a cryptocurrency, that is required to determine the value and settlement of on-chain financial derivatives, particularly options and perpetual swaps.