Variational Oracle

The Variational Oracle sources prices and market information for all assets supported by the Variational Protocol.

The Oracle works by streaming a variety of different data feeds in real-time to aggregate as much data as possible about assets supported by Variational. Since Variaitonal supports many markets before they achieve any CEX listings, the Variational Oracle includes streams for both CEX and DEX pairs.

To determine prices of CEX-listed pairs, the Variational Oracle uses a robust weighted combination of the prices on different exchanges to guard against manipulation. This weighting mechanism requires multiple supported exchanges to have listed a token before the CEX pricing algorithm can function. For tokens that either have too few or no CEX listings, the DEX pricing algorithm is used. This algorithm uses on-chain data from liquidity pools like Uniswap and PumpSwap to determine prices, pulling data from pools on all leading blockchains and L2s.

Having a customizable, in-house oracle for the Variational Protocol is beneficial for a few key reasons. First, it allows Omni and Pro to support assets quickly. Price data for nearly every token with an active liquidity pool can be obtained through the streams that the Variational Oracle aggregates, meaning newly deployed tokens can be immediately priced by the Oracle. Additionally, since the Variational Oracle is modular (new streams can be easily added/removed), the Variational Protocol is well-positioned to support more exotic and novel markets. For example, to support gold derivatives, a dedicated price feed for gold that sources data from TradFi markets can be added. To support prediction market derivatives, feeds from Polymarket, Kalshi, and others can be integrated to the oracle.

In the long-run, the Variational Oracle’s modularity is its primary benefit. Listing markets as diverse as volatility indices, commodities, prediction markets, in-game items, and more will all require sourcing and structuring data that is not commonly used in crypto. Since no single third party provider aggregates all crypto and non-crypto data sources in real-time, Variational uses in-house infrastructure. The Variational Oracle multiplexes many different data streams, standardizes and cleans the data, and provides the necessary building block for exotic listings.