How Does ‘Market Manipulation’ Affect the Final Settlement Price?
Market manipulation, such as a 'spoofing' or 'pump-and-dump' scheme, can artificially inflate or deflate the price of an asset on a specific exchange. If the oracle relies on that single, manipulated price for settlement, the final profit/loss calculation for the derivative will be unfair and incorrect.
Decentralized oracles mitigate this by aggregating data from multiple exchanges, making it exponentially more expensive to manipulate the final aggregated price.
Glossar
Final Profit/Loss
Realization ⎊ Final Profit/Loss in cryptocurrency, options, and derivatives contexts represents the net monetary outcome of a trading position or portfolio after all associated costs, including transaction fees, funding rates, and potential tax implications, are accounted for.
Decentralized Oracles
Attestation ⎊ Decentralized oracles, within cryptocurrency and derivatives, represent a pivotal shift in data sourcing, moving away from centralized authorities to verifiable, distributed networks.
Final Settlement
Resolution ⎊ Final Settlement, within cryptocurrency derivatives and financial markets, signifies the conclusive determination of obligations arising from a contract, typically involving a cash or asset transfer to extinguish all outstanding commitments.