Opinion by: Will Fey, Co-Founder and Smart Contract Developer at Ammalgam
We discuss oracles as if they are plumbing: an unseen utility that ensures price flow into protocols. Yet oracles are not neutral infrastructure; they are dependencies that have grown political over time.
DeFi promises permissionless markets, composable systems, and minimized trust.
However, by 2025, most major lending and trading protocols will continue routing their crucial functions—liquidations, collateral checks, pricing decisions—through a single oracle network.
This isn’t decentralization; it’s inherently risky.
The problem isn’t new, but it’s worsening
This isn’t an attack on the builders of oracles; the issue is structural.
Protocols delegate pricing to prevent manipulation, latency, and gas costs. This seems logical on paper. However, what occurs when the oracle lags? When latency escalates to 30 seconds? When a faulty feed triggers mass liquidations of solvent accounts?
We’ve witnessed this recently. Though it may have been the worst time, it’s neither the first nor will it be the last.
Venus experienced a $100 million liquidation spiral due to a manipulated price feed. Mango Markets was drained after its oracle was exploited in a coordinated strike. Fortress DAO lost millions due to oracle manipulation. Curve’s event in July 2024 sparked panic among lending protocols as oracle-based values sharply declined. In March 2022, Inverse Finance lost over $15 million when attackers distorted the pricing oracle to withdraw more funds than their collateral allowed.
Protocols have continuously echoed the same sentiment: “It was an oracle issue.” But that highlights the problem. If one price feed can collapse a system, it signals a fundamental design flaw.
The threat goes beyond technical vulnerability; it’s about the centralization that looms. When essential systems depend on a few privileged data sources, DeFi starts to mirror traditional fintech.
Oracle dependency equates to soft governance
If your protocol’s stability relies on Chainlink’s next price tick, then Chainlink exerts upstream governance on middleware.
Oracles influence when liquidations occur, the value of your collateral, and your borrowing limits. This is significant control. Yet users can’t vote on feed configurations, can’t audit the pricing pipeline’s every step, and often remain unaware when crucial parameters change.
Feed logic can shift, sources can be changed, or thresholds can be readjusted without onchain governance or community oversight.
Related: NYSE-parent ICE collaborates with Chainlink to integrate forex and precious metals data onchain
This represents soft governance through dependency—unvoted, opaque, and increasingly significant. Consequently, DeFi users unknowingly become reliant on a select few unaccountable entities for outcomes that impact billions. Data providers effectively act as risk managers, embedded deep within protocol logic without facing equivalent scrutiny or controls.
Interestingly, some newer players are rethinking the model by emphasizing transparent infrastructure, onchain observability, and reduced latency. This innovative approach has gained traction, briefly appearing on DefiLlama metrics before removal. Whether Stork becomes the alternative or not, the shift towards oracle diversity is long overdue.
It’s time to diversify the stack
This isn’t a rejection of oracles; it’s a plea for optionality.
Oracles are valuable but shouldn’t be the sole input. Emerging architectures are already testing alternatives. Protocols are looking into onchain liquidity references, internal AMM-based pricing, and adaptive fallback mechanisms for volatility or failed updates.
Resilience implies having multiple ways to verify truth. If your protocol collapses due to one oracle’s failure, it was never decentralized; it was fragile.
We require systems that incentivize participants to take risks, penalize actions that threaten shared liquidity, and adapt in real-time to stress. Above all, we need systems that aren’t entirely reliant on infrastructure not controlled by the protocol.
Decentralization should signify durability
Optionality is the ultimate goal—not for elegance, but for robustness.
DeFi can’t endure on trustless code alone; it requires systems that can flex without shattering. Infrastructure choices are not only technical but also political. Every dependency is a vote. If we continue to favor oracle monocultures, we should not be shocked when they become gatekeepers.
When the next incident occurs (and it will), you wouldn’t want to explain why your $80 million liquidation event was merely “an oracle issue.”
Opinion by: Will Fey, Co-Founder and Smart Contract Developer at Ammalgam.
This article is for general information purposes and is not intended to be, nor should it be taken as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
