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Onchain Economics
DeFi Primitives

Oracle

A service that provides external data (like asset prices) to smart contracts that cannot access off-chain information directly.

In-Depth Explanation

Blockchains are deterministic and can't fetch external data. Oracles bridge this gap by feeding price feeds, weather data, or other information on-chain. Chainlink is the dominant oracle provider. Oracle manipulation is a major attack vector—many DeFi exploits involve price oracle manipulation.

Related Terms

Smart Contract

Self-executing code deployed on a blockchain that automatically enforces agreement terms when conditions are met.

Liquidation

Forced closure of an undercollateralized position, typically with a penalty to the borrower.

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Automated Market Maker

AMM

A smart contract that provides liquidity and enables trading using a mathematical formula instead of an order book.

Liquidity Pool

LP

A smart contract holding paired assets that enables trading, lending, or other DeFi activities.

Collateralized Debt Position

CDP

A loan where users deposit collateral to mint or borrow assets, with liquidation risk if collateral value falls.

Lending Protocol

A DeFi application that matches lenders with borrowers through smart contracts, enabling permissionless borrowing and lending.

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