Opinion: Will Fey, Ammalgam Co-Founder and Smart Contract Developer
We talk about oracles like plumbing, invisible utilities that keep prices flowing through protocols. Oracle is not a neutral infrastructure. They are dependencies. Over time, they have become political.
DeFi is built on the promise of permissionless markets, composable systems, and minimized trust.
However, in 2025, most major lending and trading protocols will route their most sensitive functions (clearing, collateral checking, pricing) through a single oracle network.
This is not decentralization. It is dangerous by design.
The problem isn’t new, but it’s getting worse
This is not a criticism of those who construct oracles. The problem is structural.
The protocol outsources pricing to avoid manipulation, delays, and gas costs. It makes sense on paper. What happens when the oracle stalls? What happens when the delay spikes to 30 seconds? What happens when a bad feed requires a mass liquidation of solvent accounts?
Just last week, we saw it in action. It may have been the worst time, but it wasn’t the first time. It won’t be the last.
Venus suffered a $100 million liquidation spiral caused by a manipulated price feed. Mango Market was drained of funds after its oracle was used in a coordinated attack. Fortress DAO suffered millions in losses due to oracle manipulation. Curve’s July 2024 CRV event caused panic to ripple throughout the lending protocol as the value supplied by oracles plummeted. In March 2022, Inverse Finance suffered over $15 million in losses after attackers manipulated pricing oracles to borrow more funds than the collateral warranted.
The protocol has said the same thing over and over: “This was an Oracle issue.” But that’s the point. If a single price feed can bring down the system, that’s a side effect of a major design flaw.
Technical vulnerabilities are not the only danger. Centralization is creeping in. DeFi becomes indistinguishable from fintech when core systems rely on a small number of privileged data sources.
Dependency on Oracle is a type of soft governance
If the solvency of the protocol depends on the next price tick on Chainlink, then Chainlink becomes the upstream governance of the middleware.
The oracle determines when liquidation occurs, the value of the collateral, and the amount that can be borrowed. That’s meaningful control. But users don’t vote on feed configuration, can’t audit every step of the pricing pipeline, and often don’t even know when important parameters change.
You can update feed logic, swap sources, and readjust thresholds without on-chain governance or community oversight.
Related: NYSE parent company ICE uses Chainlink to bring foreign exchange and precious metals data on-chain
This is soft governance of dependencies: unvoted, opaque, and increasingly consequential. As a result, DeFi users unknowingly become dependent on a small number of unaccountable parties for outcomes that affect billions in value. Data providers become de facto risk managers, deeply embedded in the protocol logic without being subject to similar scrutiny or checks.
Interestingly, some new entrants are starting to rethink the model with a focus on transparent infrastructure, on-chain observability, and minimizing latency. This new approach and innovative architecture has garnered attention in certain circles and even briefly appeared in DefiLlama’s metrics before being removed. Whether Stork is an alternative or not, Oracle’s momentum toward pluralism is long overdue.
It’s time to diversify your stack
This is not to deny oracles. It’s a request for optionality.
Oracles are helpful, but they are not the only input. Some new architectures are already experimenting with alternatives. The protocol is considering on-chain liquidity references, internal AMM-based pricing, and fallback mechanisms to accommodate volatility and update failures.
Resilience means there is more than one way to determine the truth. If the protocol stopped because one oracle failed, it would not have been decentralized. You were vulnerable.
We need a system that rewards participants who take risks, punishes behavior that jeopardizes shared liquidity, and adapts to stress in real time. And above all, we need a system that is completely independent of infrastructure that the protocol does not control.
Decentralization should mean durability
Optionality is the real end goal. Not because it’s elegant, but because it’s sturdy.
DeFi cannot survive on trustless code alone. We need a system that bends without breaking. Infrastructure choices are not only technical, but also political. All dependencies are votes. And if we continue to vote for the Oracle monoculture, we shouldn’t be surprised if they become the gatekeepers.
Because when the next thing happens (and it will), I don’t want to be the one explaining why the $80 million liquidation event was “just a matter of oracle.”
Opinion: Will Fey, co-founder and smart contract developer at Ammalgam.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.