Conversation

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 πŸ”Ί
@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 πŸ”Ί
@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 πŸ”Ί
@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 πŸ”Ί
@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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Zhu Su πŸ”Ί
@zhusu
We are getting words confused here I think. I'm not arguing they should be legally liable. I'm saying if this were to occur on an exchange, it clearly means that exchange is unfit to have margin trading.
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Zhu Su πŸ”Ί
@zhusu
Replying to
@jespow
@Muhd_Amrullah
and 3 others
Max order size, max percent limit away from mid, enter auction mode (allows arbers time to prepare capital to arbitrage the flow). Many such concepts can be taken from trad mkts (esp FX, equities) I agree there are always tradeoffs and new problems would then arise potentially
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Jesse Powell
@jespow
Yeah, ultimately the answer is more liquidity with time. In some cases people are glad you liquidated them instantly, in others mad that you didn't wait longer. Someone will always end up holding the bag. It's very hard with 24/7 continuous, loosely connected global markets.
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