How do DeFi protocols know how much your collateral is worth?
My understanding: Using the spot price from a single DEX pool as a price feed carries significant risks. When a pool is shallow, one large trade can skew the price.
Lending and derivatives platforms use oracle-reported prices to calculate collateral value and trigger liquidations.
$LINK is the token of the decentralized oracle network Chainlink.
#LINK
DYOR, and participate responsibly.
My understanding: Using the spot price from a single DEX pool as a price feed carries significant risks. When a pool is shallow, one large trade can skew the price.
Lending and derivatives platforms use oracle-reported prices to calculate collateral value and trigger liquidations.
$LINK is the token of the decentralized oracle network Chainlink.
#LINK
DYOR, and participate responsibly.