Discrete Monitoring

Discrete monitoring refers to the practice of checking the underlying asset price for barrier triggers or average calculations at specific, pre-defined time intervals rather than continuously. This approach simplifies the operational requirements for smart contracts, as they only need to query price oracles at scheduled times.

It also reduces the likelihood of an option being knocked out by a momentary, fleeting price spike that occurs between monitoring events. Traders and protocols choose discrete monitoring to manage the trade-off between precision and the computational costs of constant price tracking.

In the context of decentralized finance, this is a standard method for balancing security, gas costs, and the desired sensitivity of the derivative to market price movements. It creates a more predictable environment for settlement.