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What Are the Risks Associated with Using a Single, Centralized Oracle?

Single point of failure, susceptibility to manipulation, and risk of incorrect liquidations if the oracle is compromised or fails.
Greeks.live05.12.25

What Are the Risks Associated with Using a Single, Centralized Oracle?

A single, centralized oracle presents a significant single point of failure and is highly susceptible to manipulation. If the centralized source is compromised or fails, the smart contracts relying on its data could execute liquidations or settlements based on incorrect prices.

This can lead to unfair losses for traders and poses a major security risk for decentralized finance (DeFi) protocols.

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Glossar

Centralized Oracle

Attestation ⎊ A centralized oracle, within the context of cryptocurrency derivatives and financial markets, fundamentally provides verifiable data feeds to smart contracts and trading systems.

Single Point of Failure

Concentration ⎊ In crypto derivatives, this risk materializes when excessive collateral or governance control resides with a small number of entities, such as a few large liquidity providers or key developers.

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