TechFlow News, February 23 — Cross-chain financial oracle Pyth Network announced a collaboration with institutional-grade data provider Kaiko to launch the Pyth Liquidity Oracle V1, aimed at addressing liquidity attack issues currently plaguing the DeFi market.
The liquidity oracle helps protocols reduce the risk of holding oversized positions in low-liquidity tokens, lowers the likelihood of attacks targeting low liquidity, and significantly strengthens user confidence in permissionless DeFi protocols.
Pyth suggests that applications such as lending and money market protocols should utilize liquidity information to mitigate the risks associated with establishing large positions in low-liquidity tokens. Currently, most protocols lack safeguards against such risks, so introducing solutions targeting these issues can greatly improve the current market landscape.
Kaiko provides its off-chain token market impact forecast data to Pyth. The Pyth Rust SDK then offers protocol developers a straightforward method to convert market-impact-based risk parameters into adjusted large-position valuation prices. Data users can easily integrate this information into on-chain risk parameters within their protocol logic.
Pyth and Kaiko have also jointly reviewed past liquidity attack incidents involving Mango Markets and Aave, proposing desired improvements for oracle mechanisms.Original link
