Oracle Price Data

Understanding Oracle Price Data Feeds

A defining feature of the Eve Exchange protocol is its reliance on ChainLink's Oracle network for price data. Chainlink Data Feeds aggregate information from diverse sources through a decentralized network of independent node operators. This unique approach underpins the foundation of our platform, ensuring that trades executed on Eve Exchange, especially Smart Trades with the Dynamic Price setting enabled, reflect an average price derived from multiple markets and their corresponding volumes. This stands in contrast to a single protocol's locked supply.

Leveraging ChainLink's Price Data Feeds offers numerous advantages. To illustrate this in simple terms, consider the following example:

Example - Mitigating Extreme Fluctuations

Imagine ETH is priced at $1800 on Kraken with a daily volume of $2 million. Simultaneously, on Uniswap, ETH holds a price of $1850 with a daily volume of $1 million. Additionally, numerous other ETH markets exhibit slight price discrepancies and varied volumes. Determining your portfolio's true value or executing ETH trades at the 'fair' market price under these circumstances can be complex.

This is where Oracles come into play, and it's why Eve Exchange is distinctive...

Firstly, if you're not planning to sell, you could employ Oracle price data to gauge the 'fair' value of your ETH holdings. This application is one of the prevalent uses of ChainLink Price Data Feeds. However, what sets Eve apart is that we base quoted prices on Oracle data and enable users to establish their trade prices using the same Oracle data.

Consequently, while prices exhibit slightly less volatility (with benefits and drawbacks depending on your objectives), they more accurately mirror the true market value due to Oracle prices being volume-weighted average prices (VWAP). In other words, the prices are fairer.

It's essential to note that this is an oversimplified and conceptual example illustrating the benefits of utilizing Oracles for asset and trade pricing. We hope this context offers insight.

For those keen on delving deeper into this topic, we recommend reading the following ChainLink article: "TWAP vs. VWAP Price Algorithms"

Treating Stablecoins on Par with the US Dollar

Another aspect worth mentioning is our treatment of stablecoins in the protocol.

Given our reliance on Oracles, we disregard minor deviations between stablecoin prices and the US Dollar. Instead, we consider them 1:1. For instance, if a trade is quoted in USD but USDT is valued at 0.999 against USD, we overlook the $0.001 discrepancy, ensuring that users pay precisely 100 USDT for a trade valued at 100 USD. This simplifies transactions for everyone involved.

Conclusion

We trust that this article has clarified the nuances of the Eve Exchange protocol's pricing dynamics. Should you require any clarification, please don't hesitate to reach out to us. Your inquiries are always welcome.