Many DeFi protocols rely on price oracles to determine what different collateral assets are worth. When those feeds stop working or get gamed, protocols can make decisions based on wrong numbers.

There are two distinct ways that oracles can break. Oracle failure or misconfiguration is when a feed goes stale, often during periods of high volatility. Oracle manipulation is deliberate, where an attacker uses a flash loan or a thinly traded market to move the reported price, and then borrows against the manipulated value.

Assets with shallow liquidity or a single price source are the easiest to impact, and protocols that read a fixed-rate price set by a third party are particularly susceptible to oracle failure and manipulation.