Coinbase is trying to fix the broken DeFi industry with stable price oracles.
In an April 23 announcement, Coinbase introduced Coinbase Price Oracle: “a service critically important to the DeFi ecosystem” that will be available through the CoinbasePro API.
Both existing ways are bad
Coinbase argues that the two existing approaches to price data sources for DeFi – “published signed data” from a centralized source or using a price source from a decentralized exchange – are unsatisfactory:
“Using data from an off-chain source requires trusting the publisher to publish the correct prices and keep the signing key secure; The latter has historically proven to be a difficult problem, especially when the stakes are high. Similarly, relying on DEX-generated power channels exposes the protocols to several novel attack vectors that have not yet been fully explored. ”
Coinbase claims its approach to price oracles combines the best of both worlds : it has a reputation as “one of the most liquid exchanges” and offers data authenticity guaranteed by Coinbase's signature private keys:
“Anyone can post the prices on-chain and since the data is already signed by the Coinbase private key, there is no need to trust the publisher. Using the Coinbase Price Oracle public key, anyone can verify the authenticity of the data “
However, it is not clear from the announcement what this “private key” represents. Coinbase claims it is based on “the same infrastructure that stores large amounts of crypto assets on behalf of Coinbase customers”:
“Our security experts developed many of the best-in-class key storage techniques: These same techniques are used to ensure the security of the private key that signs the Coinbase Oracle pricing.”
The announcement quotes Robert Leshner, CEO of Compound, an autonomous and algorithmic interest rate protocol:
“Coinbase Oracle will increase the security and decentralization of Compound's price feed, which is central to the protocol and ecosystem of applications built on Compound . We are not alone: the rest of the DeFi will benefit from faster development, consistent data and shared standards. ”
No competition for Chainlink
The CEO and founder of Chainlink, the company that provides cryptocurrency price oracles, Sergey Nazarov told Cointelegraph that he does not see the new Coinbase company as competition, but rather a complementary product :
“We have known for months. This came out of a hackathon that was won by Compound. Probably what will end up happening is that we will consume your API. ”
He also noted that the “signature” refers to a normal API signature and is not related to a blockchain infrastructure. Furthermore, Nazarov believes that the fact that Coinbase is entering this space is a sign that blockchain data localization is a growing industry segment, and the demand for such services will increase. He did not rule out the possibility of partnering with Coinbase in the future oracle pricing infrastructure.
Many of the same vulnerabilities in the DeFi ecosystem have been exposed over and over again . Fortunately, the input of trusted players like Coinbase can provide the community with much-needed stability.
Cointelegraph contacted Coinbase for comment, but did not receive a response in time for publication.