How Does a Smart Contract Determine the 'Correct' Price from Multiple Oracle Sources? ⎊ Path

How Does a Smart Contract Determine the ‘Correct’ Price from Multiple Oracle Sources?

A smart contract determines the correct price by utilizing a decentralized Oracle network (DON) that aggregates data from numerous independent sources. The contract's logic calculates a robust aggregate value, such as a median or volume-weighted average price (VWAP).

This method mitigates the impact of any single outlier or manipulated data point, establishing a more reliable and secure price feed.

What Is a ‘Volume-Weighted Average Price’ (VWAP)?

How Does a TWAP Oracle Differ from a Volume-Weighted Average Price (VWAP) Oracle?

How Does a Volume-Weighted Average Price (VWAP) Differ from a Simple Average in Settlement?

What Are the Trade-Offs between Using a TWAP and a Volume-Weighted Average Price (VWAP) Oracle?

How Can ‘Volume-Weighted Average Price’ (VWAP) Be Skewed by Wash Trading?

How Can Traders Use Volume-Weighted Average Price (VWAP) to Gauge Execution Quality and Slippage?

What Is the Difference between a Spot Price Oracle and a Volume-Weighted Average Price (VWAP) Oracle?

What Is the Difference between a Volume-Weighted Average Price (VWAP) and a TWAP?

Glossar

Oracle Data Sources

Oracle ⎊ In the context of crypto derivatives, an oracle serves as a bridge between off-chain data sources and on-chain smart contracts.

Decentralized Oracle Network

Network ⎊ A Decentralized Oracle Network (DON) facilitates secure and verifiable data feeds from external sources to blockchain environments, crucial for smart contract functionality within cryptocurrency derivatives and options trading.