How Does a Time-Weighted Average Price (TWAP) Oracle Enhance Security?
A TWAP oracle calculates the average price of an asset over a specific time interval, rather than relying on a single, instantaneous price quote. This averaging technique makes the oracle highly resistant to flash loan attacks or temporary price manipulations, as a manipulation attempt would need to be sustained and significant over the entire time window to materially affect the reported price, making the attack prohibitively expensive.
Glossar
Maximum Extractable Value
Extraction ⎊ This concept quantifies the maximum value a block producer, such as a miner or validator, can extract from transactions within a single block beyond the standard block reward and gas fees.
Flash Loan Attacks
Attacks ⎊ Flash Loan Attacks exploit the nature of uncollateralized, atomic loans to manipulate asset prices temporarily on a single blockchain transaction, allowing the attacker to profit from arbitrage or oracle manipulation before repaying the loan.
Twap Oracle
Oracle ⎊ A Twap Oracle, within cryptocurrency derivatives and options trading, represents a specialized data feed providing time-weighted average price (TWAP) benchmarks.
Average Price
Calculation ⎊ The Average Price represents the volume-weighted mean execution price of an underlying asset or derivative contract over a specified interval, crucial for settlement procedures in many crypto derivatives markets.