Spread and slippage

The protocol's oracle quotes both a price and a bidirectional spread. The spread captures the typical bid-ask gap and slippage cost for the asset, used to compute fair-value bounds for collateral and debt valuation.

Why a spread?

A single mid-price oracle doesn't capture an asset's liquidity. A token with 1B XPOW in 24h volume and a token with 10K XPOW in 24h volume can have the same mid-price but very different real liquidation outcomes.

The spread is the protocol's way of pricing this difference. A wider spread means:

• More conservative collateral valuation.
• Larger over-collateralisation buffer required.
• More cautious liquidation bonus.

How it's computed

The oracle computes both:

• A smoothed log-mid-price (geometric mean).
• A smoothed log-spread (the ratio of bid to ask, in log space).

These are stored separately and updated on each refresh, with the same α = 0.944 decay.

The reported bid and ask use an auto-widening spread that scales with the notional being quoted. Per Oracle::_hlfSpread:

center      = quote at requested amount        (mid price)
rel         = stored relative half-spread      (from the TWAP'd log-spread)
x           = center * rel / mid               (normalised notional)
mu          = log2(x + 1) + 1                  (auto-widening multiplier)
hlf_spread  = center * (rel * mu) / 2

bid = center - hlf_spread
ask = center + hlf_spread

For small notionals (x → 0, so mu → 1), hlf_spread → center · rel / 2 — i.e. the small-notional limit reduces to the simple bid = center · (1 − rel/2), ask = center · (1 + rel/2) form. For larger notionals, mu grows logarithmically and the quoted spread widens, capturing the additional price impact a larger trade would face.

This shape gives two properties at once: small queries hit the smoothed log-space spread directly (linear in log-price, so the same multiplicative factor at any price level), and large queries pay an auto-widened premium proportional to log₂(x+1).

Empirical scaling

For most liquid assets:

• Major stablecoins (XPOW): spread ≈ 0.05–0.10%.
• Major majors (APOW, BTC): spread ≈ 0.05–0.20%.
• Mid-cap altcoins: spread ≈ 0.20–1.0%.
• Long-tail tokens: spread ≈ 1.0–10%.

The protocol uses the live oracle-reported spread; it doesn't hard-code these.

Practical effect

For most users, the spread doesn't change the user-facing math. Health factor calculations use mid-price; the spread is a secondary input for risk-management computations.

The spread does affect the protocol-default LTV for newly added tokens. Higher spread = lower default LTV. Governance can adjust per-token weights to compensate.

Where to go next

• Manipulation resistance — security properties
• Oracle parameters — defaults and bounds
• Log-space index — the math behind log-space TWAP