How Does a Derivatives Exchange Use Multiple Oracles to Prevent Unfair Liquidation? ⎊ Path

How Does a Derivatives Exchange Use Multiple Oracles to Prevent Unfair Liquidation?

A responsible derivatives exchange uses a composite index price derived from multiple, independent oracle feeds that source data from several high-liquidity exchanges. This multi-oracle approach prevents a price anomaly or manipulation on a single exchange from causing mass, unfair liquidations.

By aggregating data, the exchange ensures the liquidation trigger is based on a robust, market-wide fair price, not a manipulated spot price.

What Is a “Liquidation Engine” and How Does It Prevent Market Manipulation during a Cascade?

Why Is a Multi-Exchange Index Price Preferred over a Single Spot Price for Calculating Margin Requirements?

Why Is a Centralized Exchange’s TWAP More Susceptible to Manipulation than a Composite Index TWAP?

How Do Exchanges Prevent Manipulation of the Funding Rate Itself?

How Does the Choice of ‘Data Source’ (E.g. Exchange) Affect the TWAP Integrity?

Why Do Exchanges Use a “Mark Price” Instead of the Last Traded Price for Liquidations?

How Is ‘Mark Price’ Used to Prevent Unnecessary Liquidations?

Why Might an Exchange Use a TWAP of Multiple Exchange Prices Rather than a Single One?

Glossar

Multiple Oracles

Attestation ⎊ Multiple oracles, within decentralized finance, represent a redundancy in data sourcing intended to mitigate single points of failure inherent in relying on a solitary data feed for derivative pricing and settlement.