Conversation

Zhu Su 🔺
@zhusu
Agree. Yeah the thing is that exchanges aren't incentivized to police these oracle attacks b/c it actually brings much-needed/sorely-missed spot volume to their own venue (while they can argue the loss occurs on the derivatives exchanges). So only industry-pressure would do it.
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Jesse Powell
@jespow
Oracles are only responsible for reporting the truth, not for controlling events or even what people do with the truth. To spot exchanges, the behavior is neither good nor bad. A robust index, like
@CFBenchmarks
is much less vulnerable to being influenced by a market anomaly.
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Jesse Powell
@jespow
So, it is not so much an attack on the oracle as it is the exploitation of a naive counter party. The sucker accepted an unknown, variable price, which turns out could, under the terms, be set by the other contract participant. Oops. Not the oracle's fault.
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Zhu Su 🔺
@zhusu
I think the word "fault" here isn't really a useful one, I agree. Main question is do underlying spot exchanges that are often used as oracles have any real or perceived esponsibility to the community to prevent this behavior?
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Zhu Su 🔺
@zhusu
If the price on kraken goes from $10k to $1 and then $10k while nowhere else moves and all margin longs on kraken itself are liquidated, would we agree that their order book malfunctioned and that something needs to change?
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udiverse
@udiWertheimer
Depends on the circumstances. If there was an actual malfunction, yes. But if the markets are just inefficient because some large prop firm randomly shut down, and you think there’s such a sweet arb opportunity lying around, why complain to kraken? Go ahead and take it
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Zhu Su 🔺
@zhusu
You think if a prop firm going down on kraken caused all btcusd margin longs to get liquidated there, while a few arb firms profited, that the exchange would be not responsible?
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Jesse Powell
@jespow
The exchange is not responsible for the price whatsoever. The exchange's responsibility is to match orders. The "price" (bid, ask, last trade, whatever) is set by the market participants, not the exchange. So, if the tech is working properly, the exchange is never responsible.
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Zhu Su 🔺
@zhusu
Noted. So if the price of btcusd went from $10k to $1 and back to $10k on btcusd on kraken while nowhere else moved, you'd consider that the forces of the free market and that margin longs on kraken should have done more due diligence, yes?
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