Introduction

Why introduce a TWAP oracle for low-caps at Wax

Low liquidity token markets represent an issue for protocols and projects that want to offer assets, services and unique interactions with gated access. Pricing those components is often based on instant price at DEXes (Decentralized Exchanges) and this is prone to real-time manipulation as the capital necessary to alter the prices is not high.

For the past years, price-oracle manipulation has been a common attack vector on most-chains and represents a never-ending risk to protocols that intend to enable any sort of offering based on a specific asset price.

With this concern in mind, there were already many solutions available at the blockchain ecosystem. We have outlined some pros and cons of the ones that were best fit for this context:

Chainlink

Pros:

Decentralized Data Feeds: Chainlink’s network of independent nodes ensures a high level of data accuracy and resistance to manipulation.

Broad Market Coverage: It offers a wide range of data, including price feeds, which is critical for projects requiring real-time market information.

Context: Chainlink's robustness and reliability make it a strong contender. However the instant-price -issue is not addressed.

Uniswap's TWAP

Pros:

Resistance to Short-Term Manipulation: By averaging prices over a period, TWAP mitigates the impact of sudden market fluctuations or manipulation.

Simplicity and Ease of Use: Its straightforward methodology is easy to implement and understand, making it accessible even to projects with limited technical resources.

Context: TWAP's methodology, while not providing real-time data, is well-suited for markets with lower liquidity. It offers a practical solution to the price manipulation challenge in such environments. However, the price may become outdated during periods of higher volatility.

The solution at WAX

With the intent of enabling new businesses to create less risky offerings on-chain with little to no overhead, we have introduced a permissionless TWAP oracle that can be deployed for any token that has an AMM market on Alcor Exchange (and soon on others).

Based on Keeper Node observations over time, price variation is smoothed to ensure more predictable market conditions are available to customers.