The OETH Oracle can be used by platforms or traders to price OETH in terms of ETH.
The OETH Oracle uses on-chain data to calculate a fair price of OETH in terms of ETH. This is made up of on-chain market data and redemption rates from the OETH Vault. The market data is sourced from liquidity decentralized exchanges like Curve.
The OETH Vault is used as a floor price as it has a 0.5% redeem fee. If the market price drops below the OETH Vault floor price, the floor price will be used by the OETH Oracle.
Initially, the OETH Oracle is only using the Curve OETH/ETH pool. This is the same pool that is used by the OETH Vault for automated market operations (AMO). At the time of writing, it has around USD 61 million of OETH and ETH in the pool.
As other AMO pools are added to the OETH Vault, they will be added as a source of market data to the OETH Oracle. For example, the Curve frxETH/OETH pool or a Balancer OETH/ETH pool.
For the Curve pools, the Exponential Moving Average (EMA) oracle price will be used. The EMA oracle is used instead of the pool spot rate as that is easily manipulated using flash loans. The EMA oracle price also does a good job of tracking the spot rate as shown below.
When other pools are added, the market price will be weighted by the total value locked (TVL) in the pool. This prevents less liquid pools with small volume from skewing the oracle price from the true market price.
The OETH Vault manages the OETH collateral assets and is the contract that users mint or redeem OETH. The vault redeem process will burn a specified amount of OETH or a portion of the collateral assets weighted by asset value. So redeeming 1 OETH will result in the user receiving frxETH, rETH, stETH and WETH.
The Vault’s floorPrice() function returns the ETH value to 18 decimals of the collateral assets for redeeming 1 OETH. The ETH price of each asset is taken from the Vault’s Oracle Router which uses the following Oracle’s for pricing.
| Asset | Oracle |
|---|---|
| frxETH | Frax’s frxETH/ETH Oracle |
| stETH | Chainlink’s stETH/ETH Oracle |
| rETH | Chainlink’s rETH/ETH Oracle |
| WETH | N/A as 1 ETH can always be redeemed from 1 WETH |
The OETH Oracle will use the market OETH/ETH price with a floor price of a Vault redeem and a ceiling price of 1 OETH/ETH. This is, if the market price moves below the value received from redeeming the collateral assets directly from the vault, then the Oracle will use the vault floor price. The vault floor price includes the 0.5% redeem fee so at best will be 0.995 OETH/ETH.
The OETH Oracle is capped at 1 OETH/ETH to prevent over-inflating the price of the pegged asset.
Chainlink’s de facto standard AggregatorV3Interface is used for the OETH Oracle.