Oracles
Echelon’s loan origination and liquidation services rely on price feeds from external data sources, also called Oracles. To ensure proper liquidations and avoid any bad debt, Echelon relies on three major oracle sources:
Custom (Thala)
Echelon uses a conjuction price data from both Pyth and Switchboard to ensure price derivation for assets onboarded on the protocol is robust and secure. In the event that these providers go down, Echelon will switch to a temporary fallback by performing a cron job that fetches prices from DEXs and CEXs to maintain system integrity. Oracle providers for each market is displayed on the dApp.
Custom Oracles for LSTs:
Echelon allows for looping of LSTs (Liquid Staking Tokens), enabling a higher LTV of 90% in eMode. To minimize risks, the price of LSTs is uniquely calculated through a combination of Pyth prices and on-chain staking rewards calculation. For instance, the price of sthAPT for liquidation is calculated as follows:
sthAPT = APT price [From Pyth] * thAPT/APT exchange rate [from Thala staking rate calculation]
The APT price comes from one of the safest and most advanced oracles, Pyth.
sthAPT is calculated on chain as thAPT + staking rewards.
Using the exchange rate between liquid Staked Aptos helps smooth the price during periods of low liquidity, by reflecting the true value of the position in APT after the unstaking period is complete. Overall, this can significantly reduce the risks of liquidation from LST depegs, while also mitigating any risks of protocol bad debt associated with large liquidations.
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