Oracle Security’s role in DeFi derivatives markets with Chainlink & GMX


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Chaos Labs is all set to optimize and secure on-chain financial apps and share their latest collaborations with Chainlink Labs and GMX. The long-awaited GMX V2 launch on Arbitrum uses Chainlink Data Streams, an all-in-one solution for decentralized finance (DeFi), combining automated trade execution and low-latency data delivery.

The rapidly evolving DeFi derivatives market attributed to the advent of high throughput and low-cost blockchains such as Arbitrum, short time-to-finality, and minimum gas fees can optimize on-chain trading experiences perfectly. This innovation has set a platform for explosive growth within the sector. 

Nevertheless, greater responsibility is required with an excellent innovation such as this. With the expansion of the DeFi derivatives market, the role of Oracles, which includes entities for feeding reliable, timely, and accurate data into financial ecosystems, becomes increasingly important. 

The complexity of the incentives and systems they create can open new doors for exploitation. Hence, the role of Oracle security is of utmost importance. Oracle aims to ensure secure DeFi apps whose accuracy directly affects financial outcomes such as the profitability of LPs and liquidation timing. Hence, choosing a secure Oracle service requires a calculated decision considering reliability, decentralization, and resilience. 

Chaos Labs has developed tools to assess the resiliency and robustness of the Oracle network and different exploit verticals to verify its integrity and ensure that the costs of manipulation outweigh the theoretical payoffs. 

The DeFi derivatives market expansion has brought about all new degrees of leverage accessibility, increasing transaction size and volume. However, this evolution has brought newer challenges, particularly related to leverage’s high stakes and latency. Chainlink Labs has developed solutions in collaboration with the Chainlink Data Stream to resolve these challenges. The decentralized and transparent data infrastructure will cater to markets sensitive to latency, such as the DeFi derivatives market. 

Another leader in the decentralized perpetual exchange arena, GMX, has taken a considerable leap forward by launching V2. GMX has joined Chaos to scale GMX V2 and ensure efficient and secure expansion. To provide a fair and transparent trader experience, Chainlink Data streams will provide ultra-low latency data updates and allow several leading data providers to reliably offer timely and accurate data, multiple decentralized layers, conflict-of-interest-free data, and defense-in-depth security. 

The GMX integration with Chainlink has magnified the role of Oracle security, addressing significant security concerns like latency, meeting the requirements of rigorous quality data controls, and safeguarding users against price manipulation. 

In the most dynamic DeFi world, where risk management has become a discipline, Chaos Labs has recently collaborated with industry leaders Chainlink Labs and GMX to advance data security and risk management within the DeFi derivatives space.

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