Float Protocol Integrates Leading Oracle Solution Chainlink to Secure the Stabilization of FLOAT

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Float Protocol

6 min readMay 14, 2021

Today, Float Protocol is announcing its live integration with market-leading oracle solution Chainlink. The initial integration involves Float Protocol leveraging the widely-used ETH/USD Chainlink Price Feed to power our monetary policy and price stabilisation mechanisms.

We selected Chainlink because it’s the most time-tested oracle solution in DeFi, supplying high-quality price data on-chain using decentralized oracle infrastructure that has proven resilient against various unexpected situations, such as API downtime, flash crash outliers, and data manipulation attacks via flash loans. This provides our users with superior guarantees around the security and reliability of FLOAT, making it a more trusted and stable form of internet-native money.

Understanding FLOAT and How It Uses Chainlink

Float Protocol is building the decentralised monetary system of the future. At the heart of the Protocol is the FLOAT token. FLOAT is designed to be stable and have significantly lower volatility than most cryptocurrencies, but its purpose is not to hold its price at $1.00 USD.

Instead, it’s designed to float and change value over time, making it one of the first truly native internet currencies. FLOAT is differentiated from traditional stablecoins, whose purchasing power is being constantly eroded due to their fiat pegged nature, particularly in times of expansionary monetary policies. By being a crypto-native unit of account, FLOAT is not tied to a single state’s monetary policy, instead having its value partly supported by a basket of crypto-assets.

FLOAT is stabilised through frequent Dutch Auctions that expand or contract the supply, as well as partly supported by a Basket of cryptocurrencies that are used in the auction process. In version 1 of the Protocol, the Basket will only contain ETH, but in later versions, we plan to diversify the Basket to more assets, such as those representing key goods and services of the crypto economy.

If the market price of FLOAT is above or below its target price, the supply will change by minting FLOAT (expansion) or buying up and burning FLOAT (contraction). We do this through a normal Dutch Auction (in an expansion) and a reverse Dutch Auction (in a contraction).

In an expansion, the Protocol offers to mint and sell FLOAT to arbitrageurs starting at the time-weighted average market price (TWAP), with decreasing price increments every Block of the auction until the target price. To buy the available FLOAT, arbitrageurs must pay a blend of ETH and BANK. Any ETH paid is deposited in the Protocol’s Basket, and any BANK paid — Float Protocol’s governance token — is burned. The precise blend of ETH and BANK depends on a ratio we call the Basket Factor: the total value of the Protocol’s Basket / the total value of FLOAT in circulation.

In a contraction, the Protocol offers to purchase FLOAT from arbitrageurs, paying them a blend of ETH from the Basket and newly minted BANK tokens. Once again, the precise blend of ETH and BANK depends on the Basket Factor. The Protocol offers to purchase the FLOAT at increasing price increments starting at the TWAP, increasing each Block of the auction to the target price. Any FLOAT purchased by the Protocol is burned.

Before these Dutch Auctions are started, the Protocol needs the most up-to-date and accurate ETH-USD price data, which is supplied by a Chainlink-powered decentralized oracle network. This price data is used to calculate the Basket Factor of the Protocol and the new target price, thus greatly influencing the FLOAT-ETH exchange for each step of the Dutch Auction. In this way, FLOAT can be bought or sold by the Protocol in exchange for ETH from the Basket at a reliable exchange rate, furthermore, the blend of ETH and BANK can be calculated due to a reliable Basket Factor calculation.

The target price is updated before every auction via the monetary policy contract. This process is required for the Protocol because it gives FLOAT its floating characteristic. Broadly, the change in target price depends on the Basket Factor’s direction (increase or decrease) and the difference between the market price and the currency target price for FLOAT to scale the magnitude of the change. The ETH-USD Chainlink Price Feed is critical in this calculation as it enables the Protocol to have a relative measure of the value of the ETH in the Basket, as well as return the target price in terms of US dollars for the user.

Why Chainlink Price Feeds

Chainlink Price Feeds are pre-built decentralized oracle networks that relay aggregated price feeds on-chain across various cryptocurrency and traditional assets. Chainlink Price Feeds source high-quality data from numerous premium data aggregators like BraveNewCoin and Kaiko, leading to volume-adjusted global market prices with robust market coverage. Chainlink Price Feeds are secured by a decentralized network of independent, security-reviewed, Sybil-resistant oracle nodes run by leading blockchain DevOps teams with a proven history of reliability, even during extreme gas prices and network congestion. This framework ensures that both the data sourcing and transmission on-chain are removed from any single point of failure, with each individual component held to high standards.

Chainlink was our top choice due to its security and reliability. Although the Protocol adds a buffer to the initial auction ask price to protect itself from market manipulation or stale prices, we still want a reliable and accurate data feed for ETH/USD. Furthermore, as we build a crypto-native unit of account for the decentralised finance ecosystem it is important that the platforms which we use and rely on like Chainlink are also decentralised.

The ETH/USD Price Feed is very easy to use with good documentation, making for a seamless integration. This reliability will be very important going forward as initially the auctions will be held once every 24 hours, but eventually they will be able to be called on-demand by any market participant. This brings the granularity of the price feed down to potentially every 150 Blocks on the Ethereum blockchain, the length of a single auction on Float Protocol.

In the future, we plan to expand our integration of Chainlink Price Feeds to support the diversification of the Basket in later versions of the protocol; creating a hamburger index for crypto. This would require usage of additional Chainlink Price Feeds, such as ETH/GBP, LINK/USD, ETH/EUR, ETH/YEN/ ETH/RMB, ETH/GOLD, etc., which are all aggregated to generate a relative FLOAT price that relies on a range of assets instead of a single fiat currency.

“Chainlink was the easiest integration of the whole system — requiring the least code yet providing us with a huge amount of confidence in the accuracy, security, and reliability of its price data from day 0.”
— Paul M, Lead Dev and Co-founder at Float Protocol

The initial minting ceremony of FLOAT starts on the 9th of May 2021 at 22:00 UTC and runs until the 15th of May 2021 at 22:00 UTC. The first auction of the Protocol will run on the 16th of May 2021 at 22:00 UTC. For more details and how to take part in the initial minting ceremony of FLOAT, please read here.

Learn More: Chainlink

Chainlink is the most widely used and secure way to power universally connected smart contracts. With Chainlink, developers can connect any blockchain with high-quality data sources from other blockchains as well as real-world data. Managed by a global, decentralized community of hundreds of thousands of people, Chainlink is introducing a fairer model for contracts. Its network currently secures billions of dollars in value for smart contracts across the decentralized finance (DeFi), insurance and gaming ecosystems, among others.

Chainlink is trusted by hundreds of organizations to deliver definitive truth via secure, reliable data feeds. To learn more, visit chain.link, subscribe to the Chainlink newsletter, and follow @chainlink on Twitter.