How Does an Oracle Provide Reliable Price Data for a Decentralized Option?
An oracle is a third-party service that securely fetches real-world data, such as an asset's price, and submits it to the blockchain for smart contract use. For a decentralized option, the oracle provides the reliable, tamper-proof spot price needed to determine if the option is in-the-money and to trigger the automatic settlement at expiration.
Glossar
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.
Reliable Price Data
Data ⎊ Within cryptocurrency derivatives and options trading, reliable price data transcends simple market quotations; it represents a foundational element for robust risk management and sophisticated trading strategies.
Decentralized Finance
Architecture ⎊ Decentralized Finance, or DeFi, fundamentally reimagines traditional financial infrastructure through blockchain technology, specifically leveraging smart contracts to automate and execute financial agreements without intermediaries.