# Derivatives — openOracle use case

> Opens, closes and liquidations priced by a game sized to the position.

Source: https://www.openoracle.org/use-cases/derivatives

# DERIVATIVES

A derivative needs an oracle at three moments: open, close and liquidation. Each is a moment where a manipulated price pays for itself.

Written for Protocol teams and risk owners in this vertical

01 Today 02 What changes 03 Parameters 04 Next

01 // Today

## What breaks today

Derivatives venues settle against a price signed off-chain or read from a feed at a specific instant. Both concentrate enormous value on a single observation, and a participant with a large position has a proportionally large incentive to move that observation.

### Feed cost vs open interest

Open interest can grow far beyond what it costs to corrupt the feed

### Venue-wide correlation

Venue-level risk is shared by every position on the venue

### TWAP under proposer control

Multi-block proposer control makes short TWAPs manipulable during settlement

### One observation, huge payoff

A large position has a proportionally large incentive to move the print that settles it

02 // What changes

## What openOracle changes

Each position’s price is secured by a game sized to that position

> A venue does not need a streaming price to settle a position. It needs one at open, at close and at liquidation. With openOracle each of those is its own game, sized against the position it settles. The party that wants the event funds the price: the matcher reports the opening price, and a close or liquidation starts with a fresh report from whoever wants it. openPunt works this way.

## ONE EXPIRY. ZERO SIGNERS.

03 // Parameters

## How to size it

There is no default configuration. Sizing a game depends on your protocol and its threat model, so start from the attack vectors and economic bounds in the docs.

[PARAMETER REFERENCE ⟶](https://www.openoracle.org/build/integrate#parameters)[PRICE AN ATTACK ⟶](https://www.openoracle.org/security#cost)

Worth knowing before you build

Opening and closing take at least one settlement window, not a single block. A venue can still show an indicative mark price for display. The oracle game is only used when money moves.

▸ Reference

[openPunt introduction](https://docs.openoracle.org/punt/introduction) [Attack vectors](https://docs.openoracle.org/openoracle/attack-vectors#linear-notional-manipulation) [Economic bounds](https://docs.openoracle.org/openoracle/economic-bounds#settlement-probability-inequality)

04 // Next

[Lending Liquidations priced by the market at the moment they matter, not by a committee. ⟶](https://www.openoracle.org/use-cases/lending) [On-chain swaps Swaps settled at the oracle price, not at whatever a pool happens to quote. ⟶](https://www.openoracle.org/use-cases/swaps)

[◂ All use cases](https://www.openoracle.org/use-cases)

Reach out to the openOracle team for guidance

[info@openoracle.org](mailto:info@openoracle.org)