Price & Risk Oracles

Critical to the CVEX platform's operations are two types of oracles: Price Oracles and Risk Oracles. These external data sources are fundamental for continuous trading activities.

Price Oracles

These are crucial for providing real-time prices of underlying assets, which are necessary for Mark Price calculations and settlement of contracts. Regular updates (ranging from 1 to 30 minutes) of price data are critical to maintaining the integrity of Mark Prices, which directly influence traders' profit and loss (P&L), margin, and equity.

Platform owners are tasked with selecting the appropriate price sources for each contract linking them to their respective underlying assets. CVEX Protocol intends to support various price sources, including:

  • Off-chain Oracles: These trusted entities transmit prices to the protocol on chain via transactions, offering the flexibility to support a wide range of assets. The primary advantage lies in their adaptability, but they require trust and incur gas fees for price updates.

  • Decentralised Data Feeds: CVEX will also integrate a variety of decentralized oracles, such as Chainlink and DIA Data. While they provide high confidence in data integrity, the challenge lies in the limited availability of assets and potentially less frequent updates.

Risk Oracles

These oracles provide volatility for underlying assets and their return correlations. This data is crucial for accurately calculating margins, which directly impact traders' collateral requirements and liquidation thresholds. Frequent updates to risk parameters (every 1-48 hours) are essential to ensure precise and stable margin calculations. The methodology, dataset, and update frequency are all transparent.

A critical responsibility of platform owners is to manage the delicate balance between default risk and the leverage provided to traders, achieved through the accurate configuration of Risk Oracles. The effective setup and continual adjustment of risk parameters ensure that the platform operates within safe risk thresholds, thereby safeguarding both the platform's integrity and the safety of its users.

Initially, Risk Oracles will be implemented as trusted off-chain entities, primarily managed by Platform Owners. As the cryptocurrency ecosystem evolves, CVEX plans to explore decentralized sources for these critical parameters.

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