Price oracle

A smart contract knows only what is on its own blockchain. It cannot look up the price of ETH or the value of a vault share. Yet a lending market needs to know what its collateral is worth at every moment. Oracles connect that closed world to the data it depends on, which makes them essential infrastructure and a frequent target.

How a price oracle works

Most price oracles collect prices from many sources, such as exchanges and data providers, combine them into one figure and publish it onchain. Two delivery models are common:

• Push feeds write a new price to the chain on a schedule, or whenever the price moves by more than a set threshold.
• Pull feeds keep signed prices offchain, and a user or protocol brings the latest one onchain at the moment it is needed.

Chainlink and RedStone are widely used oracle providers, and both offer push and pull models.

Market prices vs. fundamental prices

A market price feed reports what a token trades at. A fundamental price feed reports what the token is worth based on its underlying assets, for example a vault token's share value computed from the vault's holdings. The difference matters for collateral. If a vault token briefly trades below its underlying value in a thin market, a market feed pushes lending positions toward liquidation while a fundamental feed does not. The trade-off is that a fundamental feed reflects a genuine loss of market confidence more slowly.

How oracles fail

• Manipulation. An attacker borrows a large sum through a flash loan, moves the price in a thin liquidity pool that an oracle reads, borrows against the inflated price and leaves the protocol with bad debt.
• Stale data. If a feed stops updating during a fast market, contracts act on old prices.
• Bad sources. If enough sources report a wrong price, the combined figure is wrong too.
• Misconfiguration. A feed set up with the wrong decimals or the wrong asset can misprice a market instantly.

A simple example

A lending market accepts a token whose price comes from a single small pool. An attacker buys heavily in that pool, doubling the reported price within one transaction, supplies the token as collateral, borrows other assets against it and lets the price fall back. The market is left holding collateral worth half what it lent. A feed that combined many sources over time would have resisted the move.

Risks and limits

No oracle design is perfect: every feed trades off speed, cost, accuracy and resistance to manipulation. A money market covers the rest with conservative loan-to-value limits, caps on how much of an asset can be supplied or borrowed, and pauses for abnormal prices. Data that has to move between chains brings its own risks, which is why oracle networks also offer cross-chain messaging such as Chainlink CCIP.

RedStone fundamental price feeds are live for trUSD and strUSD on Ethereum. A fundamental feed reports a token's value from its underlying assets rather than from its trading price in one market.