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Oracles & Settlement


Oracles are the core of each market within Perennial. Each market pulls in one or more prices from oracles to be used in the payoff function.
While a simple market will just use a single price feed (ex. ETH), more complex market could use payoffs with multiple price feeds (ex. ETH / BTC).
Perennial's modular design supports custom oracles. However, the most recent audit covered an implementation of Pyth's low latency oracles. We expect these to be the most common oracles used within the protocol but we are excited to see novel oracles that cover NFTs, RWAs etc be implemented.


Since the market payoff is computed directly from the oracle price, a lag needs to introduced into the settlement system so that entering and exiting positions cannot be timed to arbitrage the market.
Time in Perennial markets is split into units called oracle versions. Settlement only occurs on the transition of one oracle version to another. When a user requests to open or close a new position, that position delta sits in a pending state until the next oracle version update, after which it takes effect.
Settlement Flow:
In this example: the user calls open(10) at during oracle version 1, and close(10) during oracle version 3. The user's position opens at the start of version 2 and closes at the start of version 4, meaning they are exposed to the price difference between versions 2 and 4.
Oracle Version
User Action
Oracle Price
Position (Profit/loss)
Open 1 ETH
Opening: 10
Closing: 0
- (0)
Opening: 0
Closing: 0
1 ETH (0)
Close 1 ETH
Opening: 0
Closing: 10
1 ETH (+$50)
Opening: 0
Closing: 0
- (+$25)
Developer Note: The settlement flow happens entirely on-chain, giving strong guarantees for projects building on top of Perennial.
Perennial smart contracts store the current version for position adjustments, allowing for the positions opening price & PnL to be retroactively calculated at the next on-chain settlement period (when the contracts are interacted with again), avoiding the need for a second interaction during opens/closing (or the need for a keeper).