Price Feed Risk

Tydro markets use price feeds for every position. If wrong, a position can be liquidated when it should not be, or not liquidated when it should be. This page describes the risks of bad pricing

Why the price matters

The protocol uses oracle prices to value collateral and debt and to decide when a position can be liquidated. The protocol acts on the price it is given. If that price does not reflect the real market, the protocol still acts on it.

How feeds fail

Price feeds can fail in several ways. A feed can go stale and stop updating. It can report a value that is wrong. It can be manipulated, particularly for assets whose underlying spot markets have thin liquidity, which makes those markets easier to move. The infrastructure delivering the feed can go down.

The consequences fall on positions. A price reported too low can trigger liquidations that should not happen. A price reported too high, or one that fails to update during a real decline, can stop liquidations that should happen and leave the market exposed to bad debt.

What the current safeguards cover, and what they do not

Tydro prices assets from Chainlink. Chainlink aggregates prices across multiple sources, which reduces exposure to any single exchange. On top of that, Tydro applies staleness and deviation checks: if a price update is too old or moves by more than a defined threshold, it is treated as invalid. The PriceOracleSentinel adds a further layer specifically for L2 sequencer downtime. It restricts new borrows and liquidations when the Ink sequencer is unavailable, preventing the protocol from acting on prices that have not updated because the network itself is down.

These controls reduce the chance of acting on a bad reading. They do not remove oracle risk. Tydro currently relies on Chainlink as its primary price source so a failure or manipulation of that source is a concentration to be aware of.

An oracle failure can trigger liquidations that should not happen or prevent ones that should, and either can cause loss.