Understanding DeFi Protocols Without Oracle

DeFi Protocols Explained Without Oracle

Amidst the rapidly developing DeFi ecosystem, a new wave of builders is challenging the status quo by reimagining lending and derivative protocols without relying on oracles. Messari researcher Chase discusses these non-oracle DeFi protocols.

Typically, DeFi protocols rely on oracles to determine liquidation triggers and contract outcomes. However, this reliance limits collateral and introduces attack vectors. Oracle-less protocols redefine the core services of DeFi. One approach is to shift pricing and underwriting burdens to users, enabling loans from collateral on any chain and opening up lending for a wider range of assets.

Another type uses AMM LP positions, such as Uniswap V3, for leverage and derivatives. By calculating liquidation and contract outcomes based on the liquidity pool, reliance on oracles is reduced. This also helps with inventory management and reduces certain forms of MEV.

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Reference: https://twitter.com/messaricrypto/status/1670794110372917250

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