Oracle System

How VarlaOracle provides manipulation-resistant pricing for prediction market positions — conservative pricing, staleness checks, and liquidity validation.

Conservative Pricing

For every position, the oracle provides two prices: the spot price (current orderbook midpoint) and a TWAP (time-weighted average price). The final price used for collateral valuation is always the minimum of the two.

finalPrice = min(spotPrice, twapPrice)

Why minimum?
├── If spot is pumped → TWAP is lower, protects lenders
├── If TWAP lags during crash → spot is lower, reflects reality
└── Attackers must sustain manipulation over time to affect TWAP

Staleness Checks

Parameter	Default	Effect
Max staleness	15 minutes	Prices older than this are considered stale
Stale behavior	Block new borrows/withdrawals	Protects against acting on outdated data
Grace period	Configurable	After oracle recovery, delays liquidation briefly

If prices are stale, the actual market may have moved significantly. Allowing borrows on outdated (potentially higher) collateral valuations could leave lenders exposed to undercollateralized positions.

Liquidity Validation

The oracle also checks orderbook depth. Positions in markets with less than $10,000 orderbook depth cannot be used as collateral — even if they have a valid price. This prevents use of thinly-traded markets that could be easily manipulated.

Data Sources

Polymarket (Polygon)

Prices are sourced from Polymarket's CLOB (Central Limit Order Book) API. Both spot and TWAP are computed from actual trade data. The oracle aggregator maintains multiple fallback sources.

Opinion (BSC)

Prices are sourced from Opinion's CTF Execution Engine. The same conservative pricing (min of spot and TWAP) applies with chain-specific staleness parameters.

Borrow Power vs Liquidation Behavior

The oracle applies different rules for borrowing and liquidation — this distinction protects borrowers during oracle outages:

Context	Stale price behavior	Rationale
Borrowing / accounting	Unavailable price → that collateral = $0 borrow power	Prevents borrowing against stale (potentially inflated) values
Liquidation	Liquidation is blocked if any non-zero collateral has an unavailable price	Prevents unfair liquidation during oracle outages
After oracle recovery	Grace period (default 5 min) before liquidation is allowed	Gives borrowers time to react after prices come back

Setting stale collateral to $0 for borrowing is conservative — it might lower your HF temporarily, but no one can liquidate you during the outage either. Once the oracle recovers, a grace period gives you time before liquidation becomes possible.

Manual Invalidation

Governance can manually invalidate a position via an emergency kill switch. When a position is invalidated:

Effect	Detail
Borrowing	That collateral = $0 — cannot be used to borrow against
Liquidation	Liquidators can still obtain a price — prevents bad debt from becoming unresolvable

Resolved Markets

After a prediction market resolves, special oracle rules apply:

Outcome	Oracle behavior
Binary (0% or 100%)	Allowed to be "stale forever" — no continuous updates needed since the outcome is final
Fractional (e.g., 50/50)	Requires explicit finalization by governance to set the canonical price

Security Properties

Attack Vector	Mitigation
Spot price pump	min(spot, TWAP) — TWAP unaffected by short-term manipulation
Flash loan attack	TWAP spans multiple blocks, single-block manipulation ineffective
Oracle downtime	Staleness check blocks risky operations; grace period protects users
Thin market manipulation	Liquidity threshold ($10K min depth) rejects illiquid markets

Timing Parameters

These are protocol defaults, all configurable by governance:

Parameter	Default	Range
Max staleness	15 minutes	1 min – 1 day
Liquidation grace period	5 minutes	0 – 1 hour
Early-closure window	7 days	0 – 90 days
Min orderbook depth	$10,000	Governance-set