How Does an Oracle Verify the Strike Price Condition for a Derivatives Contract?
The oracle continuously feeds the real-time market price of the underlying asset to the smart contract. At the contract's expiration or a specific trigger time, the contract compares the oracle's reported settlement price to the pre-determined strike price.
If the condition (e.g. price is above the strike for a call option) is met, the contract executes the necessary asset transfer or cash payout automatically.
Glossar
Price Manipulation Attacks
Vector ⎊ Price Manipulation Attacks involve coordinated, often deceptive, trading activities designed to artificially influence the market price of an asset or derivative index to trigger erroneous liquidations or exploit vulnerable oracle feeds for illicit gain.
Strike Price Condition
Threshold ⎊ The strike price condition defines the predetermined price level at which the holder of an option contract has the right to buy or sell the underlying cryptocurrency asset.
Decentralized Autonomous Organization
Governance ⎊ Decentralized Autonomous Organizations represent a novel framework for coordinating collective action, particularly relevant within cryptocurrency ecosystems and increasingly, financial derivatives markets.