In Practice
Oracle Risk Assessment Checklist
This checklist can help gauge the reliability, security, and fault-tolerance of oracles across parameters critical for managing risk exposure.
Evaluate TWP Oracle Risk:
Does the DeFi protocol/protocol ecosystem provide a tool to identify and quantify the costs associated with price manipulation?
Evaluate oracle architecture:
Is it centralized or decentralized?
What is the governance structure?
How are nodes incentivized?
What are the dependencies and failure points?
Analyze data flow and smart contract integration:
What critical on-chain decisions depend on external data?
How is data propagated from oracles to contracts?
Are appropriate data validation schemes used before contract execution?
Assess real-world performance:
Analyze historical uptime and response latency
Evaluate error rates and data accuracy metrics
Review incident response processes and post-mortems
Audit oracle infrastructure security:
Oversee pen testing procedures performed
Check security certificates, key management hygiene
Confirm monitoring against downtime and breaches
Model oracle risk scenarios:
Simulate exploit conditions through oracle data manipulation
Stress test robustness against oracle unavailability
Quantify potential impact via risk analysis models
Research mitigation strategies:
Weigh integration of redundant oracle sources
Explore oracle middleware, aggregator and proxy solutions
Stay updated on emerging standards and best practices
Explore
Uniswap V3 TWAP Oracle Risk
https://community.chaoslabs.xyz/uniswap/twap
Uniswap V3 TWAP : Assessing Risk
Chaos Labs - Omer Goldberg and Yonatan Haimowitz - Uniswap V3 TWAP: Assessing TWAP Market Risk (April 2023): https://drive.google.com/file/d/16VLIiVv6x9BHrn23Hbidzvf2vjLKgiNT/view?usp=drive_link
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