Oracles are smart contracts that provide external data, particularly price information, to blockchain applications.
Oracles on Morpho
In lending protocols like Morpho, oracles provide price data needed to determine what one token is worth relative to another. For example, the oracle of a cbBTC/USDC market is supposedly answering the question: "How many USDC is 1 cbBTC worth right now?”
On Morpho, markets are isolated and represent a pair of assets "collateral asset / loan asset". Borrowers deposit the collateral asset in order to borrow the loan asset.
The oracle price is used to calculate your position's current LTV (Loan-To-Value ratio). This is compared against the market's LLTV (Liquidation Loan-To-Value threshold) to determine if you can be liquidated.
Morpho is oracle agnostic, meaning at market creation, the creator can choose any address returning a price as oracle.
Why oracle choice matters for your position
Your liquidation risk depends entirely on the oracle's price (and interest accrual)
Oracle assumptions (like 1:1 pegs) create additional risks
Understanding your oracle = better understanding the risk
Oracles on the Morpho app
On the Morpho app, you can find basic informations around markets oracles in each market page.
Like with the cbBTC/USDC market on Base:
The main 'Overview' tab will show the oracle price info
The 'Advanced' tab provides more detailed oracle's attributes:
Oracle address -> redirecting you to the explorer oracle page
Oracle price -> price returned by the oracle
Reference price -> market price fetched from external sources (DefiLlama).
Value secured -> collateral and liquidity secured by the oracle
Trusted by-> curators listing a market using te oracle
For more detailed info about the oracle, you will need to look at contract level. The next section will provide a short explainer on how to explore oracles data.
How to identify oracle nature (advanced)
An oracle can be composed of one or several price feeds combined to provide a resulting price.
To understand "where the price comes from?", one needs to identify which feeds the oracle uses.
To do so, one has to check the oracle contract on the chain explorer. You can reach it via the redirection available in the market's 'Advanced' page.
e.g. with the cbBTC/USDC market on Base.
1. Get to the oracle contract on the explorer
https://basescan.org/address/0x663BECd10daE6C4A3Dcd89F1d76c1174199639B9
Access the Contract tab and the Read Contract (or Read as Proxy) sub-tab. There, click on Expand all.
2. Check the price
At the bottom of this page, you can see the price reported by the oracle.
Note on Reading Prices on Explorers
When you check the oracle's price() function, you'll see very large numbers that may look wrong. This is normal blockchain precision.
The exact number of decimals depends on your token pair:
Precision = 36 + (loan token decimals) - (collateral token decimals)
Examples:
- BTC (8 decimals) / USDC (6 decimals) = 34 decimals of precision
- ETH (18 decimals) / USDC (6 decimals) = 24 decimals of precision
- USDC (6 decimals) / USDC (6 decimals) = 36 decimals of precision
In our cbBTC/USDC example:
Precision = 36 + 6 (USDC decimals) - 8 (cbBTC decimals) = 34
Applied to the price retrieved at a point in time:
price: 839677126298000000000000000000000000000
price with precision: 83967.7126298000000000000000000000000000
1 cbBTC = 83967.7126298 USDC
3. Identify the feeds
Goal is to identify the feed used in this oracle. A feed is any non 0 address in the feeds fields BASE_FEED_1, BASE_FEED_2, BASE_VAULT, QUOTE_FEED_1, QUOTE_FEED_2 and QUOTE_VAULT.
More advanced info on this oracle parameters in the documentation here.
Understanding Feed Fields
• BASE = In general, it is linked to your collateral asset (e.g., cbBTC)
• QUOTE = In general, it is linked to the loan asset (e.g., USDC)
• The oracle calculates: Collateral Price / Loan Asset Price
In this example, there is only one feed visible in the BASE_FEED_1: 0x64c911996D3c6aC71f9b455B1E8E7266BcbD848F
This means that this oracle uses only one feed as source to price the market.
4. Identify the feed nature
Now that the feed or feeds are identify with there address, one will have to check each feed address to understand its nature and source.
Click on the feed to get to the address: https://basescan.org/address/0x64c911996D3c6aC71f9b455B1E8E7266BcbD848F
Then you'll have to identify which type of feed it is.
Feed providers:
Chainlink (Chainlink feeds page)
Contract nameis oftenEACAggregatorProxy
Chainlink feeds description often refers to the assets priced:
Redstone (Redstone feeds page)
descriptionmentions Redstone and asset priced
Other feeds providers can be Chronicles, Pyth, Api3, etc.
Once you've identified the feed provider and the asset(s) priced, you can get to its interface and look out for the feed dedicated page.
For the cbBTC/USDC market on Base, you can find the related feed on the Chainlink app here: https://data.chain.link/feeds/base/base/btc-usd
And compare that the contract address matches the feed one:
Congratulations! You just identified that the cbBTC/USDC market solely uses a BTC/USD Chainlink feed.
CRITICAL ASSUMPTIONS IN THIS ORACLE
This oracle makes two 1:1 assumptions:
• cbBTC = BTC (uses BTC/USD feed for cbBTC)
• USDC = USD (no USDC feed = hardcoded to $1)
Always check what 1:1 assumptions your market's oracle makes.
Understanding Price Path - cbBTC/USDC example
Here are a few additional insights when looking at other Morpho markets' oracles:
You'll see oracles named
MorphoChainlinkOracleV2, it does not mean they have been deployed by Morpho. It means the oracle has been deployed using theMorphoChainlinkOracleV2Factory, a tool/framework allowing anyone to easily deploy custom oracles.
More on this framework and how to deploy oracles here.
Hardcoded pricesIn
MorphoChainlinkOracleV2oracles, when you see 0x0000...0000 in a feed field:That conversion step is SKIPPED in the price calculation.
The price for that step is HARDCODED to 1:1
cbBTC/USDC example: No
QUOTE_FEED_1means "USDC = USD" at exactly 1:1⚠️ Risk: If the real market price moves away from 1:1, the oracle won’t notice because it assumes the peg is perfect.
Despite currently being the majority of Morpho markets' oracles, the oracle used in Morpho Markets V1 are not necessarily using the
MorphoChainlinkOracleV2framework. Any address returning a price can be used as oracle.
Understand the different types of feeds
Besides feed providers, there can be other types of feeds. Here is a non-exhaustive list of price feed types.
Feed providers
NAV (Net Asset Value)
The NAV represents intrinsic worth based on underlying holdings, not market trades. The NAV reflects the claimable value per unit of the underlying collateral and is derived from onchain accounting (ERC4626 convertToAssets value), or third-party reports.
e.g. ERC4626 are used in BASE_VAULT and QUOTE_VAULT fields.
DEX pools
A feed can point to a DEX pool (Uniswap, Aerodrome, Curve, etc.) taking into account this pools' market price.
Customs feeds
The MorphoChainlinkOracleV2 framework can use any feed returning a price, not only the ones mentioned above.
Additional resources
You can see a detailed view on different feed prices and related risk in this Steakhouse (curator) article.
Credora (risk rating company) also proposes a Market Oracle Characterization.
You can read the more about oracles in the related documentation section here.