Oracles act as a vital backbone for DeFi as it allows protocols to function properly by being able to reference asset prices in real-time. This is massively important for sectors like lending and derivatives among others. Using Maker as an example, the protocol relies on a price oracle for querying collateralization ratios on all Vaults to ensure fair liquidations. Without a secure oracle, the Maker system (as well as most other DeFi protocols) would be rather ineffective.
The DeFi industry is always in need of more secure, reliable price oracles. The more oracles available, the more options developers have, and the more decentralized DeFi systems are as they’re not all relying on a single point of failure.
#DeFi has grown to more than $1B in assets pooled in a range of protocols. The Coinbase Price Oracle provides a critical service to the DeFi ecosystem: a trusted price feed that will make platforms safer, more reliable and unlock the next wave of adoption. https://t.co/ueUhRLX6r2
— Coinbase (@coinbase) April 23, 2020
Today’s launch now allows anyone to access the Coinbase Oracle API to get signed price data on BTC <> USD and ETH <> USD markets. The price feed is sourced from Coinbase Pro – the exchange’s platform for advanced crypto traders. Coinbase Pro is one of the most liquid crypto exchanges in the world with prices updating every minute.
In short, the Coinbase Oracle increases the potential oracle options for DeFi developers and will increase the security and decentralization of DeFi price feeds at large. The Coinbase Oracle is secured by the exact same infrastructure that stores a significant amount of Coinbase customer’s assets.
Coinbase security experts designed industry-leading key storage techniques for signing Coinbase Oracle prices while also implementing protections against exchange price manipulation or invalid data.
One of the more interesting things to note with Coinbase’s new Oracle is its compatibility with Open Oracle – a set of Ethereum smart contracts developed by the Compound team to facilitate interoperable data standards for oracle prices.
The Coinbase Price Oracle provides a critical service to the DeFi ecosystem – a signed price feed available via the Coinbase Pro API. With a new secure price oracle entering the DeFi arena, developers can rest assured that they have options, whether it’s Chainlink’s decentralized oracles, Maker’s, UMA‘s, and others. Generally speaking, it’s great to see more infrastructure options available for the developer community.
All in all, this is a massive step for DeFi as the biggest crypto exchange in the world is building out critical infrastructure for open finance and continues to make moves into DeFi.
A few weeks ago, we saw Coinbase integrate major lending projects like Compound and dYdX into its non-custodial Coinbase Wallet. Coinbase has also been highly supportive of DeFi through its USDC Fund – a fund working towards the adoption of USDC in DeFi. The USDC Fund recently announced liquidity support for the USDC Uniswap liquidity pool along with depositing sponsored capital into the PoolTogether’s daily prize pool (which features USDC).
With oracles now checked off, we’ll be keen on reporting what Coinbase has lined up next. Will they integrate the Dai Savings Rate into the consumer application? Maybe allow Coinbase users to purchase a variety of TokenSets for automated asset management? Or perhaps in-app governance voting?
Only time will tell.
COINBASE JUST LAUNCHED A DEFI PRICE ORACLE
Every crypto bank will follow
Exchanges will work for Ethereum too
Earlier this year I predicted…
"At least one A-rated crypto exchange will adopt the DAI Savings Rate sometime in 2020."
One step closer
— Ryan Sean Adams – rsa.eth (@RyanSAdams) April 23, 2020
If anything’s for sure, it seems that Coinbase is just getting started on capitalizing on the open finance movement.
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Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.