The Compound protocol currently relies on a price feed, maintained by our team, to determine each user’s borrowing capacity and to measure liquidation thresholds. Although there are safeguards hard-coded into the contracts on-chain (limiting the damage that could be caused by a broken price feed), the system presents a potential single point of failure. And we’re not alone; most DeFi projects host a price feed in one way or another.
An ecosystem is needed, that can build a reliable price feed for Compound, DeFi projects, and any developer that would like to reliably access on-chain prices — a system that can operate perpetually without reliance on any one project.
Today, we’re proud to announce that we’ve broken ground on that vision, with a project called the Open Oracle System.
The Open Oracle is a standard and SDK allowing reporters to sign key-value pairs (e.g. a price feed) that interested users can post to the blockchain
The Open Oracle System splits the trust and logic required for an Ethereum price feed into four parts:
1: Off-chain Price Data
In the Open Oracle, any number of sources, known as Reporters, sign a message (price data) with a private key. Reporters can be exchanges, DeFi projects, applications, OTC trading desks, hobbyists, etc. — basically, anybody with access to price data. Reporters make this signed data available to the public.
2: Posting Price Data to Ethereum
A crypto exchange may have an extremely accurate and reputable price for a trading pair, but lack the technical capacity (or incentive) to post the data on chain reliably. This responsibility is shared among many Posters.
Under the Open Oracle System, anyone with gas and a web3 connection has the ability to post the signed data on-chain.
3: On-chain Storage
The Reporter’s timestamped price data is decoded from the signed data, and stored under their public key in the Data Contract on Ethereum. The Data Contract holds the most recent price information from each Reporter.
In fact, anyone can sign price data and store it under their public key in the Data Contract.
4: Price Views
Finally, the on-chain application (or user) requesting price data selects a subset of reported price feeds. For example, a DeFi application might average price data from three reporters e.g. Coinbase, Wyre, and an OTC desk and combine it with two on-chain prices, e.g. Uniswap and Chainlink (examples only).
This is accomplished through a View Contract, which reads, parses, aggregates, transforms, etc from the storage contract. The determination of trustworthiness or quality of the data signed by reporters is a decision ultimately made in the View. Views may use a median price, an average, or whatever methodology they favor.
If an application wishes to change methodology, or if a Reporter is no longer trusted, deploying a new View Contract is a trivial update, since storage and logic are completely decoupled.
An end to end prototype of the Open Oracle System is currently running on Rinkeby.
Three Reporters are signing price data (observed on exchanges), which are read from exchange APIs:
A single poster is repeatedly reading from these public urls and posting on chain: https://rinkeby.etherscan.io/address/0x64316d763d3925d12678778b0586a01318b44eab
The storage contract is holding the data: https://rinkeby.etherscan.io/address/0xf8273110c08af3407c6ae8bf92b1f310b15d3020#readContract
The view is aggregating the data and exposing readable prices: https://rinkeby.etherscan.io/address/0xf8273110c08af3407c6ae8bf92b1f310b15d3020#readContract
We’d love your help developing the Open Oracle System, which we hope can become a common good for the Ethereum ecosystem.
The Open Oracle System is designed to be a foundation that anybody can build on, extend, and improve. The number of Reporters, Posters, and Views can scale over time, as the ecosystem develops.