What Is ‘Data Latency’ and Why Is It a Risk for High-Frequency Derivatives Trading?

Data latency refers to the delay between when a real-world price changes and when that updated price is available to the smart contract on the blockchain. For high-frequency derivatives trading, where positions are opened and closed rapidly based on small price movements, high latency is a significant risk.

If the contract executes a trade or a liquidation based on stale data, it can lead to immediate financial loss for the trader or the protocol, especially during periods of high market volatility.