Coinbase is trying to fix the broken DeFi industry with stable price oracles.
In an announcement on April 23, Coinbase introduced Coinbase Price Oracle: “A service that is critical to the DeFi ecosystem” and 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 central source or the use of a price source from a decentralized exchange – are unsatisfactory:
“To use data from an off-chain source, the publisher has to trust that he publishes the right prices and keeps the signature key safe. The latter has historically proven to be a difficult problem, especially when stakes are high. Similarly, the use of DEX-generated stream channels exposes the protocols to several novel attack vectors that have not been fully explored. “
Coinbase claims that its approach to price oracles combines the best of both worlds: It has the reputation of being “one of the most liquid exchanges” and offers data authenticity that is guaranteed by the signature of private Coinbase keys:
“Everyone can publish the prices in the chain. Since the data is already signed by the private Coinbase key, the publisher does not have to be trusted. With the public Oracle key from Coinbase Price, everyone can check the authenticity of the data” “
However, the announcement does not reveal what this “private key” represents. Coinbase claims that it is based on “the same infrastructure that stores large amounts of crypto assets on behalf of Coinbase customers”:
“Our security experts have developed many of the best key storage techniques: the same techniques are used to ensure the security of the private key that signs Coinbase Oracle pricing.”
The announcement quotes Robert Leshner, CEO of Compound, an autonomous and algorithmic rate protocol:
“Coinbase Oracle will increase the security and decentralization of Compound’s price feed, which is central to the protocol and ecosystem of compound-based applications. We are not alone: the rest of DeFi will benefit from faster development, consistent data and common standards. “
No competition for Chainlink
The CEO and founder of Chainlink, the company that offers price oracles for cryptocurrencies, told Sergey Nazarov to Cointelegraph Don’t see the new Coinbase company as a competitor, but as a complementary product::
“We’ve known it for months. This was the result of a hackathon that Compound won. Your API will likely end up being used.”
He also noted that the “signature” refers to a normal API signature and is not related to a blockchain infrastructure. In addition, Nazarov believes that the fact that Coinbase is entering this area is a sign that the location of blockchain data is a growing industry segment and the demand for such services will increase. He did not rule out the possibility of a partnership with Coinbase in the future oracle price infrastructure.
Many of the same vulnerabilities in the DeFi ecosystem have been uncovered again and again. Fortunately, the input from trusted players like Coinbase can give the community the much-needed stability.
Cointelegraph contacted Coinbase for comment, but did not receive a response in time for publication.