Price Deviation Thresholds

Price Deviation Thresholds are pre-defined limits that determine when an oracle should update a price on-chain. Instead of updating every second, which would be prohibitively expensive, many protocols only trigger an update if the asset's price moves beyond a certain percentage.

This mechanism helps manage gas costs while still ensuring that the on-chain price remains reasonably accurate. If the market experiences a sudden, sharp movement, the threshold is triggered, and the oracle provides a fresh update to the protocol.

These thresholds must be carefully tuned; if they are too wide, the protocol risks being out of sync with the market, but if they are too narrow, the protocol incurs excessive costs. This balance is a critical part of the system's risk management framework, protecting it from both stale data and unnecessary expense.