Oracles, which allow blockchains like Ethereum to interact with off-chain data, make the decentralized finance sector go ’round. Fortunately for the DeFi space, then, cryptocurrency exchange heavyweight Coinbase is now pitching into the scene.
On Thursday, April 23rd, the San Francisco-based crypto exchange announced the launch of the Coinbase Price Oracle, which will allow anyone or any project to retrieve signed price data via an API sourced from Coinbase Pro’s extremely liquid BTC-USD and ETH-USD markets.
The move comes after DeFi stakeholders have been calling for Coinbase to release such a price feed for months. Why? Because Coinbase’s popularity can ensure that its price feeds are highly reliable and informative, as the exchange explained on Thursday:
“Coinbase is one of the most trusted companies in the crypto space and a major part of our mission is growing the cryptoeconomy. A highly reliable price feed anchored into Coinbase’s secure infrastructure can help make the DeFi ecosystem safer, reduce systemic risks and unlock the next wave of growth and adoption.”
Inside the Oracle
The new Coinbase Oracle is guaranteed by “best-in-class key storage techniques,” its builders said, and the system will notably deploy “protections against exchange price manipulation or invalid data.”
In this sense, the feed’s data is secure and trustworthy. But these aren’t the only reasons the Coinbase Oracle is interesting.
Another unique aspect of the new system is that it was made compatible with the so-called “Open Oracle” smart contracts pioneered by the builders of Compound, one of the top 3 most successful DeFi enterprises to date. This compatibility will mean the Coinbase Oracle will be useful for many projects to come, as the Open Oracle contracts offer an avenue for standardization around DeFi oracle usage.
On the news, Compound CEO Robert Leshner said
“Coinbase Oracle will increase the security and decentralization of Compound’s price feed, which is mission-critical to the protocol and the ecosystem of applications built on top of Compound. We’re not alone — the rest of DeFi will benefit with faster development, consistent data, and shared standards.”
Best If Used with Other Oracles
Coinbase Oracle is a useful tool but hardly a standalone oracle solution within DeFi. First off, it’s limited in scope: it only covers Coinbase Pro’s BTC-USD and ETH-USD price feeds, and there’s much more needed around DeFi than just BTC and ETH.
Moreover, the Coinbase Oracle’s data will be most useful if it’s combined with data from other unrelated oracles.
“To be fair, I wouldn’t use *just* Coinbase’s prices as the full Oracle (remember the flash crash in 2017?) but would add it as another source to be medianized,” MakerDAO’s Head of Smart Contracts Mariano Conti noted on Twitter.
Accordingly, Coinbase Oracle is another useful tool in DeFi’s collective toolbox rather than, say, anything close to a competitor with full-fledged decentralized oracle projects like Chainlink, which can facilitate much more than just price feeds.
“To think the Coinbase’s signed price feed is competing with Chainlink is like thinking YouTube competes with it’s video creators or that the military competes with gun manufacturers,” pseudonymous Chainlink community ambassador ChainLinkGod said.
Coinbase Keeps Advancing Into DeFi
Last week, Coinbase Custody rolled out support for Compound Governance, meaning the institutional platform’s users can now vote on Compound governance matters without having to move their COMP tokens off the platform.
A few weeks prior to that, Coinbase announced its USDC Bootstrap Fund was injecting 1 million USDC and 100,000 USDC respectively into decentralized exchange Uniswap and no-loss Ethereum savings game PoolTogether.
Additionally, that news came just days after the crypto exchange integrated DeFi dApps Compound and dYdX into the non-custodial Coinbase Wallet mobile app.