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What Role Do Oracles Play in the Stability of Decentralized Finance (DeFi) Protocols?

They provide accurate, tamper-proof off-chain data like asset prices to smart contracts, enabling reliable liquidations and settlements.
Greeks.Live21.11.25

What Role Do Oracles Play in the Stability of Decentralized Finance (DeFi) Protocols?

Oracles are essential for bringing off-chain data, such as asset prices, onto the blockchain for use by smart contracts. In DeFi, they are critical for determining the collateral value in CDP systems and the strike price in options contracts.

A reliable, decentralized oracle ensures that the protocol's liquidation and settlement mechanisms are based on accurate, tamper-proof market data, which is vital for maintaining stability.

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