📉Time Weighted Average Price (TWAP)
Time Weighted Average Price Safety Feature
Last updated
Time Weighted Average Price Safety Feature
Last updated
Time Weighted Average Pricing is when you take the average of SGO market price over a period of time. The longer this period of time is, the more stable SGO price calculations will be. You can also think of it like a technical analysis moving average window.
This is different compared to "spot pricing", which is the market price of SGO right at that moment of time. Spot pricing tends to be more volatile since SGO price could swing within a matter of seconds.
TWAP is generally a more preferred and safer way of making pricing calculations - (whereas in using spot pricing, whales could manipulate the spot price just before they make an exploitive trade on a DEX.)
TWAP is another "built-in" safety feature of SGO to protect the protocol and its holders.
DRIVE makes extensive use of Time Weighted Average Pricing(TWAP) calculations rather than the more volatile (and more manipulatable spot pricing.)
In instances where DRIVE makes a comparison between TWAP and the spot market price in its pool supply management, it also employs a maximum difference calculation to ignore outlandish spot pricing.
DRIVE's TWAP averaging period can be changed/fine-tuned by the AI which affects how fast or how slow the TWAP price will match a consistent market price.