- Coinbase has launched a price Oracle to provide price updates for BTC-USD and ETH-USD every 60 seconds, making the Ethereum DeFi ecosystem safer.
- The Coinbase Price Oracle is compatible with a number of smart contracts from Ethereum developed by the Compound team.
The reputation of Ethereum‘s DeFi has suffered severely in recent months due to hacks and the collapse of MakerDAO on “Black Thursday”. To boost confidence in the emerging industry, Coinbase has announced a price feed, a so-called “Oracle”, through which the American exchange will provide price updates for BTC-USD and ETH-USD every 60 seconds. The data for this will come from Coinbase Pro.
As Coinbase stated in a blog post yesterday, there are currently two main approaches to make prices available for DeFi applications: the publication of signed price data from an off-chain source such as an exchange, or the use of prices from decentralized exchanges (DEXes) such as Uniswap or Kyber. According to Coinbase, both solutions present problems.
The use of off-chain data requires that there is a trustworthy source for the price data. This source must correctly deliver the prices from e.g. ETH or BTC and keep the signature key safe. According to Coinbase, the latter has proved to be a weakness in DeFi protocols in the past. The delivery of data by decentralized exchanges is also not secure enough:
Similarly, relying on DEX-generated on-chain feeds exposes protocols to various novel attack vectors yet to be fully explored.
Coinbase continues to invest in Ethereum’s DeFi ecosystem
Coinbase can, according to the announcement, combine the best of both worlds by being “one of the most trustworthy companies in crypto space” and on the other hand being able to provide a “highly reliable price feed”. This is anchored in the “secure infrastructure of Coinbase”, utilizing the same technology as used for the storage of large amounts of cryptocurrencies of Coinbase customers. As the data is “already signed by Coinbase’s private key, there is no need to trust the publisher. Using the Coinbase Price Oracle public key, anybody can verify the authenticity of the data”.
The announcement also quotes important personalities of the DeFi. Robert Leshner, CEO of Compound, explained:
Coinbase Oracle will increase the security and decentralization of Compound’s price feed, which is mission-critical to the protocol and the ecosystem of applications built on top of Compound. We’re not alone — the rest of DeFi will benefit with faster development, consistent data, and shared standards.
Antonio Juliano, CEO of dYdX also expressed his satisfaction with Coinbase’s move and described Coinbase Price Oracle as a big step for the DeFi ecosystem:
A Coinbase Price Oracle will be hugely impactful for the DeFi ecosystem — price oracles are used in every lending & derivatives protocol. Coinbase is uniquely positioned to provide oracle prices as they’re the most trusted and secure institution in the space. These prices can be used as an input to help create more decentralized and secure price oracles for the ecosystem.
As the publication further states, once processed by the Ethereum blockchain, the data can be combined with other trusted sources. In addition, the Oracle is designed to be compatible with a number of Ethereum’s smart contracts developed by the Compound team. Compound is a decentralized money market that sets interest rates based on supply and demand and on which a variety of different DeFi applications are operated.
With Coinbase Price Oracle, Coinbase is strengthening its efforts in the DeFi sector. Recently the exchange announced that it will integrate Ethereum based DeFi applications directly into its wallet app for iOS and Android. Users of the app will be able to lend cryptocurrencies directly from their wallet and earn interest on decentralized platforms.