The crypto world recently experienced a rather absurd incident. A large BTC holder wanted to liquidate their Bitcoin holdings, switch to stablecoins, and then earn some investment returns—an annualized 20% yield, right? If you don’t try, you’ll never know. But after placing the order, they were immediately stunned. The liquidity pool couldn’t withstand such a large order at all, causing the price to plummet instantly, with BTC’s transaction price dropping all the way down to $24,000. That little annualized return? Not only would it fail to cover this loss, but even a lifetime of earning it wouldn’t be enough.

This incident is absurd, but it exposes some deep issues in DeFi. Without sufficiently deep liquidity pools, it’s like building a house on quicksand. No matter how attractive the price promises are, a large order can break the entire structure.

So what’s the solution? Investors need to know in advance: Is a pool truly safe? Are the price data real and trustworthy?

This brings us to a key infrastructure in DeFi—the oracle protocol. Simply put, it’s the bridge connecting real-world prices with on-chain data. Many projects are working on this. Through multi-node, multi-source aggregation mechanisms, they can effectively counteract price distortions caused by single exchanges or liquidity shortages. While big players are still desperately chasing high yields, knowledgeable people have long been researching how to fundamentally solve the disconnect between price sources and trading depth.

Oracles may not be glamorous, nor will they give you 20% annualized returns, but they are the true safety valve in the DeFi world.