Oracle Management

Oracle infrastructure represents one of the most critical dependencies in DeFi lending protocols. FiRM's reliance on accurate, timely price feeds for collateral valuation and liquidation execution makes oracle performance a top priority for the RWG. Rather than treating oracle providers as external black boxes, the RWG maintains active partnerships to ensure feed configurations align with FiRM's specific risk requirements and operational needs.

The RWG works closely with Chainlink Labs to optimize price feed performance across all FiRM markets. This partnership extends beyond basic integration to include proactive configuration tuning, methodology evaluations, and post-incident improvements. Recent examples are shared below.

The RWG participates in oracle methodology assessments, particularly for stablecoin feeds where pricing approaches significantly impact manipulation resistance.

Volume-Weighted Average Price (VWAP) vs. State Price:

Traditional VWAP methodology aggregates trade volume across exchanges and data providers, but proved vulnerable to manipulation in low-liquidity stablecoin markets. Two notable incidents highlighted these risks:

  • deUSD on Avalanche: Large trade in low-liquidity pool caused sharp price spike captured by VWAP feeds

  • USD0 on Ethereum: 12-minute pool imbalance created $1.06 price spike representing majority market volume

Following RWG feedback and consultation with multiple protocols, Chainlink migrated deUSD and USD0 feeds to state price methodology in late 2024. State pricing uses liquidity depth in pools rather than trade volume, making it significantly more resistant to manipulation through large trades in thin markets.

Key State Price Features:

  • Liquidity-weighted rather than volume-weighted pricing

  • Lookback windows prevent sudden liquidity injections from skewing weights

  • End-of-block sampling prevents intra-block manipulation attempts

  • Multiple DEX aggregation reduces single-pool concentration risk

The RWG confirmed that USR/USD, sUSDe/USD, and crvUSD/USD feeds all utilize state price methodology, providing confidence in their manipulation resistance for high-leverage market deployment.

Ongoing Monitoring & Communication

The RWG maintains regular communication channels with Chainlink's product, data, and engineering teams to ensure continuous optimization:

  • Feed monitoring: An alerts channel tracks new price feed deployments and deprecations

  • Risk-based prioritization: High-leverage and correlation-sensitive markets receive heightened scrutiny and faster parameter adjustment requests

  • Post-incident analysis: Collaborative forensics following market stress events inform configuration improvements

  • Proactive reviews: Periodic assessment of all consumed feeds against industry benchmarks and peer protocol configurations

This partnership model treats oracle infrastructure as a continuously optimized system rather than a static dependency, ensuring FiRM maintains best-in-class price feed performance as markets evolve.

Future Oracle Diversification

While Chainlink serves as FiRM's primary oracle provider, the RWG maintains exploratory discussions with alternative providers including Pyth Network, Chronicle, and RedStone. These conversations focus on:

  • Redundancy and fallback mechanisms for critical markets

  • Specialized feed types (pull oracles, high-frequency updates)

  • Emerging methodology innovations

  • Cost-efficiency for niche or experimental collateral types

Oracle diversification remains a long-term strategic consideration, balanced against the operational complexity and security implications of multi-oracle architectures.

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