A Project Claims It Can and Already Has Protected Users From Unnecessary Liquidations

In what sounds like wishful thinking, the Alpaca DEX has unveiled their “Oracle Guard” who they claim protects users from potential price manipulation, flash liquidation, and market failure.

By
John Tunney
on
May 23, 2021
Category:
BSC News

A New Hope

 As crypto investors know, there has been some recent extreme volatility in the crypto market. It seems like the perfect time for Alpaca to announce a project to combat the volatility and mass liquidation. Known as the Oracle Guard and introduced May 19th, Alpaca claims the new software can detect and stop cyber attacks against the Decentralized Exchange (DEX). 

For those who are unfamiliar, Alpaca is a DEX with your typical staking, farming, and liquidity mining. The protocol has secured almost 1 billion dollars in Total Value Locked (TVL) and offers incredibly lucrative yields. 

Source


Oracle Guard

How does the Oracle Guard work? Well, according to Alpaca, when the price of an asset in one’s farming pair has its on-chain price (from the exchange that pair is on) differ more than 10% from the average of a batch of off-chain oracles they verify with, the Oracle Guard enters Protection Mode.

Alpaca continues that this results in the disabling liquidations, opening and closing positions, and adding collateral. This is done in order to protect users from trading at bad prices and taking an unjust loss.

This is also why their Oracle Guard turns off adding collateral. Since LP tokens need their paired assets to be in a 50:50 ratio, the protocol would have to swap some of that added collateral to achieve this even ratio, which would happen at a bad price. So this too is a situation where the Guard is protecting you.

A Major Concern

Alpaca noted that there exists a major concern investors may feel now that Oracle Guard is active. What happens if one gets liquidated because they can’t add collateral due to Oracle Guard being in protection mode? 

Alpaca responded to the question, reiterating it is important to know that when Protection Mode is on, liquidations are off, so adding collateral isn’t necessary. Of course, it is possible that Protection Mode lifts and your position still gets liquidated. 

Alpaca also highlighted that this is because the Oracle Guard doesn’t protect against liquidations when prices are correct. The software only protects you from trading at bad prices or being unfairly liquidated by the market. 


A Digital Police 

Alpaca notes that their new software isn’t perfect, and difficult situations could be ahead. Errors will be made, but Alpaca argues you are much safer with him then without him, and with all the recent liquidations (Venus and PancakeBunny), Alpaca drives home the point. 

According to the rules of Oracle Guard, the attack on Venus and PancakeBunny would have been stopped. However, we will never know for certain, as Oracle Guard does not exist on the platforms.


Concluding Thoughts

This new policing software could absolutely become a game changer. In a volatile unstable market where cyber attacks happen without any recourse, a police protocol could be exactly what the Binance network and dApps need. Will Oracle Guard inspire other DEXs to build out their own policing software, or will investors lean towards a more open market without regulating protocols in place? Time will tell, but I have a feeling that this new idea of a “digital police” isn’t going anywhere anytime soon. 

For anyone looking to jump on Alpaca, I have good news. They just partnered with WalletConnect, a move that should help bring in new investors and bostler capital. 


Alpaca Finance

Alpaca Finance is the largest lending protocol allowing leveraged yield farming on Binance Smart Chain. It helps lenders to earn safe and stable yields, and offers borrowers undercollateralized loans for leveraged yield farming positions, vastly multiplying their farming principals and resulting profits.‌

Furthermore, Alpacas are a virtuous breed. That’s why, Alpaca Finance prides itself on being a fair-launch project with no pre-sale, no investor, and no pre-mine. So from the beginning, the project has always been a product built by the people, for the people. Or as they like to say: by the Alpacas, for the Alpacas.

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John Tunney

John Tunney is an accomplished analyst and crypto enthusiast. The UCLA alum has been actively reporting and blogging for 3 years, and has a passion for all things finance.

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