Price Oracle
A mechanism providing real-time price data for digital assets in DeFi protocols.
What is Price Oracle?
Price oracles, like Chainlink or Uniswap TWAP, deliver accurate, on-chain price feeds for assets used as collateral or loans in DeFi lending. They prevent manipulation by aggregating data from multiple sources. For example, Aave relies on Chainlink to value ETH collateral, ensuring liquidations occur at fair market prices. In 2025, oracles support over 500 asset pairs across major protocols.
Oracles are critical for risk management, as inaccurate prices can trigger premature liquidations or allow undercollateralized loans. In 2023, a Chainlink outage briefly disrupted $50 million in loans, underscoring the need for decentralized oracle networks. Advanced oracles now incorporate redundancy to enhance reliability.
Related Terms
Tether
The company issuing USDT, a leading USD-pegged stablecoin, focused on blockchain-based financial solutions.
Overcollateralization
A requirement for borrowers to deposit collateral worth more than the loan amount to mitigate risk.
Mint
The process of creating and issuing new digital assets or tokens on a blockchain, bringing them into circulation.
Maintenance Margin
The minimum collateral required to keep a leveraged position open.
Mainnet
The primary, public blockchain network where real-world transactions and digital assets are processed.
Paper Hands
Traders or investors who sell their digital assets quickly at the first sign of market volatility or negative news, reflecting low risk tolerance.