Opinion by: Will Fey, Co-Founder and Smart Contract Developer at Ammalgam
Oracles are often discussed as if they are mere plumbing: an unseen utility that facilitates price flow into protocols. However, oracles are not neutral infrastructure; they are dependencies that have evolved into political ones over time.
DeFi was founded on the promise of permissionless markets, composable systems, and reduced trust.
By 2025, many major lending and trading protocols funnel their critical functions—liquidations, collateral assessments, pricing decisions—through a singular oracle network.
This isn’t true decentralization; it introduces inherent risks.
The issue isn’t new, but it’s escalating
This critique isn’t directed at those developing oracles; the problem lies in the structure.
Protocols delegate pricing to prevent manipulation, reduce latency, and cut gas costs. This makes sense theoretically, but what happens if the oracle malfunctions? What if latency soars to 30 seconds? What if a faulty feed triggers mass liquidations of solvent accounts?
We’ve witnessed this recently. While it may have been a particularly bad instance, it wasn’t the first, nor will it be the last.
Venus faced a $100 million liquidation spiral due to a tampered price feed. Mango Markets was compromised after a coordinated attack on its oracle. Fortress DAO lost millions due to similar oracle manipulations. Curve’s July 2024 CRV event sent shockwaves through lending protocols as values based on oracles plummeted. In March 2022, Inverse Finance lost over $15 million due to a manipulated pricing oracle that enabled borrowing beyond collateral limits.
Protocols typically state: “It was an oracle issue.” However, that highlights the problem. If a single price feed can collapse a system, it points to a significant design flaw.
The risks extend beyond technical instability. Centralization is infiltrating. When essential systems depend on a few privileged data sources, DeFi starts resembling traditional fintech.
Oracle reliance is a form of soft governance
If your protocol’s viability relies on Chainlink’s price updates, then Chainlink wields upstream governance over middleware.
Oracles determine when liquidations occur, the value of your collateral, and the amount you can borrow. This grants substantial control. Yet users lack the ability to vote on feed configurations, audit every step of the pricing process, and often remain unaware of critical changes.
Feed logic can be modified, sources can be replaced, or thresholds can be recalibrated without on-chain governance or community oversight.
Related: NYSE-parent ICE partners with Chainlink to integrate forex and precious metals data on-chain
This represents soft governance through dependence—unvoted, opaque, and increasingly impactful. The outcome is that DeFi users inadvertently rely on a select few unaccountable agents for outcomes affecting billions. The data providers effectively become risk managers, woven deep into protocol architecture without the same scrutiny or accountability.
Interestingly, some emerging players are reassessing the model, emphasizing transparent infrastructure, on-chain observability, and reducing latency. This innovative approach has gained traction in niche communities, even appearing on DefiLlama metrics before withdrawal. Whether Stork becomes a viable alternative, the push for oracle diversity is long overdue.
Diversifying the stack is essential
This isn’t a rejection of oracles; it’s a plea for diversity.
Oracles serve a purpose, but they shouldn’t be the sole source of information. New architectures are already testing alternatives. Protocols are investigating on-chain liquidity references, internal AMM-based pricing, and fallback systems that adapt to fluctuating conditions or failures.
Resilience means having multiple methods to ascertain truth. If your protocol fails because one oracle malfunctions, it was never decentralized. It was fragile.
We require systems that incentivize participants to take risks, penalize actions that jeopardize shared liquidity, and adjust in real-time to pressure. Above all, we need frameworks that aren’t wholly reliant on infrastructure outside the protocol’s control.
Decentralization should equate to durability
Optionality is the ultimate goal, not merely because it’s aesthetically pleasing, but due to its robustness.
DeFi cannot thrive solely on trustless code—it needs systems that are flexible yet resilient. Choices pertaining to infrastructure are not merely technical; they are political. Every dependency constitutes a vote. If we continue endorsing oracle monocultures, we shouldn’t be shocked when they become gatekeepers.
When the next crisis occurs (and it undoubtedly will), you don’t want to find yourself justifying why your $80 million liquidation was merely “an oracle issue.”
Opinion by: Will Fey, Co-Founder and Smart Contract Developer at Ammalgam.
This article is for informational purposes only and should not be construed as legal or investment advice. The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.
