In a bid to broaden its focus on decentralized finance (DeFi), Coinbase has introduced a price Oracle called Coinbase Oracle. It will enable users to produce data on-chain.
A recent announcement by the digital currency exchange revealed that the Coinbase Oracle would be a source of signed price data for BTC-USD and ETH-USD markets. The Coinbase Pro exchange would serve as the source of this price data. There will also be per-minute updates to keep the data live.
This move indicates that Coinbase is widening its focus on the DeFi ecosystem, which is rising rapidly in the crypto space.
The DeFi ecosystem and its challenges
In the crypto world, DeFi has expanded as a foremost use case. Currently, DeFi protocols and decentralized applications (DApps) constitute a number of programmable financial services. Many of these protocols rely on trusted price feeds called “Oracles” that collects data from the real-world to a decentralized network. They are crucial in reporting on asset prices to ensure the proper functionality of the protocol.
To make asset prices available for DeFi, users can follow two approaches. So, either they can use prices from algorithmic decentralized exchanges (DEXes) or use an off-chain source like an exchange.
However, both approaches have their own set of challenges.
For example, reliance on prices from DEX can expose protocols to attack vectors. Also, using data from an off-chain source requires trusting the publisher to post correct prices. And this, in turn, may lead to security problems when the stakes are high.
The good news is, with the launch of the Coinbase Oracle, there is a hope of mitigating these risks.
Coinbase Oracle is the answer?
The Coinbase Oracle, anchored into the exchange’s secure infrastructure, seems to provide a workable solution. As it already has data signed by Coinbase’s private key, users do not need to rely on publishers.
Anyone can thus verify the data using the Coinbase Price Oracle public key which utilizes the same key security infrastructure as the Coinbase exchange. Moreover, thanks to its filtering mechanism, the Oracle has the capacity to flag or reject suspect data points. This can happen due to deviation from either its last reported price or the asset’s expected volatility.
Here is the developer’s guide in accessing the free CoinBase Oracle price feed.
Other projects on price feed designs
Aside from Coinbase, other crypto firms have also been working on projects targeted at producing lasting price feed designs. Such projects include the Uniswap Version 2 and tBTC, the Bitcoin-pegged ERC-20 token which is set to go live very soon.
Recently, Coinbase made the De-Fi lending and borrowing process easier for everyone with its integrated wallet. Also, Brian Brooks left his role of chief legal officer at the exchange to become the new COO and first deputy comptroller of the US Office of the Comptroller of the Currency.