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How Does a Smart Contract Determine the Fair Market Price for Collateral Liquidation?

It uses a robust, decentralized oracle network, often with a TWAP, to verify the asset's price for sale.
Greeks.Live06.11.25

How Does a Smart Contract Determine the Fair Market Price for Collateral Liquidation?

The smart contract relies on a robust, decentralized oracle network to provide a reliable price feed. To prevent manipulation, it often uses a time-weighted average price (TWAP) or a composite index price from multiple sources.

The contract executes the liquidation based on this verified oracle price, ensuring the collateral is valued accurately at the time of sale. This protects both the borrower and the protocol.

How Can Smart Contracts Verify the Accuracy of Data Provided by an Oracle before Execution?
Can a TWAP Oracle Be Manipulated, and If So, What Are the Common Attack Vectors?
How Does a TWAP Oracle Differ from a Volume-Weighted Average Price (VWAP) Oracle?
Are There Hybrid Oracle Models That Combine the Benefits of TWAP with Other Oracle Types to Reduce Vulnerabilities?

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