July 25, 2021


Bitcoin & Ethereum Blockchain News

Move Over Chainlink, UNI Might Offer a Better Oracle

The co-founder of Ethereum argued for the necessity of a centralized price oracle with a high market capitalization to make any attack prohibitively expensive. In this case, he drew UNI as an example.

Source: cryptobriefing.com

Protecting DeFi From Oracle Attacks

At the heart of DeFi, there is ETH.

The native currency of the Ethereum network is used as gas to facilitate transactions and as a reserve currency. Most pairs on Uniswap, for example, use ETH as the second asset.

To secure any application running on Ethereum, DeFi needs a reliable price oracle for the ETH/USD pair to protect it from oracle attacks . Knowing the real-world value of ETH/USD isn’t as easy as simply looking at the ETH/USDC price on Uniswap, nor an average of ETH/USDC, ETH/USDT, ETH/GUSD as that would only improve the security of the ETH/USD price slightly.

Currently, Chainlink is the leader in oracle networks, but Buterin argues that Uniswap could build a better alternative with a stronger incentive system to ensure reliable price feeds.

While Chainlink is striving to develop a complex oracle network capable of providing reliable on-chain information to smart contracts, Buterin argues that a more minimalist alternative would be best for the price of ETH/USD.

UNI would be a great candidate as the market capitalization of the DeFi token is currently around $22 billion , making any attack extremely costly.

While the efficiency might not be at the level of Chainlink yet, the real challenge is building a reliable oracle lies in its security. The value of UNI would be used to guarantee the price feed of the oracle, in essence requiring a certain amount of UNI to force the price feed into relaying fake information. The cost of assembling enough UNI tokens to provide a fake price for ETH/USD to create an opportunity for an oracle attack would be prohibitive and discourage any hackers.

The idea is also a testament to the growth of DeFi and the broader Ethereum ecosystem. Instead of a technical solution, Buterin has revealed the power of tightly aligned economic incentives.

Disclaimer: The author held ETH and several other cryptocurrencies at the time of writing.