What is a price oracle?
A price oracle is a data feed that brings external information (like asset prices) into smart contracts. Since blockchains are isolated systems, smart contracts cannot natively access off-chain data — oracles bridge this gap.
Why oracles matter in DeFi
Many DeFi protocols depend on accurate price data:
- Lending protocols need prices to calculate collateral ratios and trigger liquidations
- Derivatives need prices to settle contracts
- Stablecoin systems need prices to maintain pegs
Oracle manipulation attacks
If a protocol relies on a single, easily manipulated price source (like a DEX spot price), attackers can use flash loans to temporarily manipulate the price and exploit the protocol. This has caused hundreds of millions in losses.
Chainlink and decentralised oracles
Chainlink is the dominant decentralised oracle network. It aggregates prices from multiple sources and uses a decentralised network of nodes, making manipulation extremely difficult and expensive.
Oracle-free protocols
Some DeFi protocols are designed to be oracle-free — they don't need external price data. TurboLoop's fixed-yield model is oracle-free: the yield comes from actual trading fees, not from price calculations.