How Does High Network Latency Contribute to Stale Data Risk?
High network latency means there is a delay between when the oracle nodes fetch the real-world price and when that price is confirmed on the blockchain. If the underlying asset's price changes significantly during this delay, the confirmed price is already outdated or "stale." This is a critical risk for options and derivatives, as a few seconds of latency during high volatility can lead to unfair settlement prices.
Glossar
Unfair Settlement
Remedy ⎊ An unfair settlement in cryptocurrency, options, or derivatives contexts denotes a discrepancy between expected and realized outcomes due to systemic flaws or counterparty actions, often manifesting as valuation errors or execution discrepancies.
Oracle Nodes
Agent ⎊ Oracle Nodes are the distributed set of actors or software instances responsible for fetching external data, aggregating it, and submitting the resulting validated price feeds onto the blockchain for use by DeFi applications, including options platforms.
Stale Data
Latency ⎊ Stale data within cryptocurrency, options, and derivatives markets represents a temporal disconnect between information availability and its reflection in pricing mechanisms, creating opportunities for arbitrage or increased risk exposure.
Network Latency
Propagation ⎊ Network latency, within cryptocurrency, options trading, and financial derivatives, represents the time delay for data transmission across a network, critically impacting trade execution speeds and arbitrage opportunities.