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Oracle Collateralization

1 min read
Pronunciation
[awr-uh-kl kuh-lat-er-uh-luh-zay-shun]
Analogy
Like a security deposit landlords hold from tenants to ensure they follow lease terms; oracles stake collateral to guarantee data integrity.
Definition
The practice of requiring oracle nodes to stake or lock up collateral that can be slashed if they provide incorrect or malicious data, aligning incentives for honest reporting.
Key Points Intro
Oracle collateralization secures data integrity by financially punishing misbehavior.
Key Points

Stake requirement: Nodes lock tokens in contract.

Slashing conditions: Defined misreports trigger collateral forfeiture.

Dispute window: Timeframe to challenge attestations.

Incentive alignment: Honest reporting preserves stake.

Example
Chainlink requires each oracle operator to stake LINK; if off‑chain audits detect faulty price reports, a portion of stake is slashed.
Technical Deep Dive
Collateral contract holds `stake[node]`. Consumers can call `slash(node, proof)` during dispute period. On success, contract burns or transfers stake to challenger.
Security Warning
Overly low stake may not deter attacks; calibrate to potential profit from misreporting.
Caveat
High collateral can reduce node participation; balance security with decentralization.
Related Terms
Oracle Slashing
Oracle DAO
Oracle Incentive Model
Oracle Governance

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