Aggregation Algorithms

Aggregation Algorithms are the mathematical methods used by oracle networks to combine multiple raw data points from various sources into a single, reliable price value. Simple averages are often insufficient because they are vulnerable to extreme outliers; therefore, more robust methods like medianizing or weighted averages are preferred.

Medianization is particularly effective because it ignores extreme values that might be the result of a single compromised source. Advanced algorithms may also account for the historical reliability or the stake weight of the providers.

By producing a consolidated price, these algorithms reduce volatility and ensure the data used by smart contracts is stable. This is vital for maintaining the accuracy of derivative price feeds.