All the DeFi protocols, especially the lending platforms, require price feeds of the assets they are dealing with. Price feeds are required to access the risk factor of a borrower and stimulate liquidation if required. To achieve this, blockchain oracles are used to retrieve price feeds in a decentralized way. In addition to this, computational feeds are used by hybrid smart contracts for performing off-chain computation.
As illustrated above, the Open Protocol requires both Price and Computational feeds from oracles to function.
Price Feeds - General price feeds provide the current value of the loan in US Dollars. Fair price is the permissible price of the underlying asset. The Open Protocol requires these price feeds for determining the collateral value such that if the collateral becomes insufficient, a liquidation call may be sent to the borrower. Furthermore, liquidators can use these price feeds to check the credit health of the borrower and liquidate the collateral if required.
Computational feeds - Computational feeds bring machine learning capabilities. Open implements a volatility feed that helps it to determine the current state and the projected volatility of a primary market. This is directly responsible for determining permissible CDR (collateral-to-debt ratio) on an intricate level.
Thus, it is extremely important for the protocol to have a trusted source for price feeds to facilitate a healthy liquidation system. To achieve this, the open protocol has integrated the Empiric network oracle. Empiric is a fully decentralized oracle service that poses as an unbiased source of truth for the protocol.