Another $2 million DeFi exploit on mirror protocol was exposed today. DeFi seems to be collapsing and outflows are reaching all-time highs. What's going on? An explanation of price oracles and failures👇
DeFi protocols allow users to trade, lend, and borrow assets. However, these assets are mostly synthetics (both crypto and stocks) whose prices are determined based on "real world" prices of the underlying. Since these prices are off-chain, DeFi protocols use smart contracts to interact with "Price Oracles" which are data feeds of asset prices that serve as a bridge to the real world.