Is Chainlink's top competitor? Coinbase announces building price oracle for DeFi

In an effort to address the fragmented and vulnerable DeFi ecosystem, Coinbase announced yesterday that it will be launching a new service called "Price Oracle" for the DeFi ecosystem. This service aims to provide more accurate and reliable price data for DeFi protocols that are less susceptible to liquidity issues.

Both Existing Solutions Have Problems

Currently, when DeFi applications need to execute debt settlements, margin calculations, or trade performance based on token prices, these DeFi projects have two options: using on-chain (decentralized exchanges) data or off-chain (APIs connected to centralized platforms) data.

Coinbase pointed out that both existing DeFi price data import methods are unsatisfactory:

"Using data from off-chain sources requires trusting that the publisher will provide correct prices and must maintain the security of the signing key, which has historically proved to be a difficult problem, especially when the funds involved in DeFi are too large. Similarly, relying on on-chain price data generated by decentralized exchanges also exposes DeFi protocols to various novel attacks."

Coinbase claims that its price oracle combines the best of both worlds. First, price data comes from the "most liquid exchanges" (referring to Coinbase itself), and all price data sent out from Coinbase will be signed with Coinbase's private key to ensure data authenticity. The announcement also quoted a statement from Robert Leshner, CEO of the decentralized lending platform Compound, to promote the importance of this service:

"The Coinbase Oracle will improve the security and decentralization of Compound price data, which is crucial for protocols and applications built on Compound. We are not alone, and the rest of DeFi will benefit from faster development, consistent data, and shared standards."

Competitor to Chainlink?

Many people's first thought upon hearing this news is whether Coinbase's price oracle will be a major competitor to the decentralized oracle project Chainlink. However, Sergey Nazarov, CEO and co-founder of Chainlink, stated in an interview that he does not see Coinbase's new service as a competitor but more like a complimentary product. He also mentioned that Chainlink does not rule out the possibility of future collaboration with Coinbase on price oracle infrastructure.

Furthermore, Sergey Nazarov believes that Coinbase's entry into this space signifies that "blockchain data organization" is a growing area, and the demand for such services will continue to increase.

Many vulnerabilities in the DeFi ecosystem have been repeatedly exposed. It is hoped that trusted large service providers like Coinbase can bring the much-needed stability to the DeFi community.

Related Reading

• Institutional View: Oracles, NFTs, and Incremental Market Projects Will Explode in 2020
• Practical Use Cases of Oracles: Chainlink Launches Price Data for 25 Trading Pairs

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