Type of Oracles
When creating an oracle, customers have multiple configuration options. The following characterization is based on the sources the oracle uses.
Market Rate Oracles​
Market rate oracles aggregate data from multiple sources, including onchain data from DEXs and offchain data from CEXs. This approach ensures real-time pricing but is also sensitive to market fluctuations.
Exchange Rate Oracles​
Also called Fundamental Oracles, Exchange Rate Oracles are computed based on the value of underlying assets. They provide stable reference rates but they may not always reflect real-time market fluctuations. These are most frequently associated with LSTs (Liquid Staked Tokens) and yield-earning token wrappers (e.g. ERC4626 tokens).
In other words, an exchange rate oracle indicates how much an asset is worth based on what the asset is backed by.
Hybrid Oracle​
This type of oracle uses a combination of exchange and market rates.
For example, the WUSDM / USD oracle uses the market prices from DEXs for USDM, and transforms them using the fundamental value of the wrapped price.