Oiler — One Year Later

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Oiler Network

6 min readDec 22, 2021

It has been almost a year since we first shared our Oiler Vision and began building the Oiler Trading Platform. The past year has been full of progress, a little bit of uncertainty, and of course excitement for what is to come. As pioneers in this niche market, we were bound to face some obstacles along the way. The technical and economic design of the highly anticipated Oiler Forwards product family has been a real struggle. The price of 1 ETH was approximately $735 at the time we published our first Medium article. While the gas prices at that time seemed high, they were nothing compared to the exorbitant prices we have today (in USD terms). We have good news though! With the recent launch of the StarkNet-Ethereum Storage Verifier, and Nafta, we feel that we are back on track! This article aims to give a high level overview as to the current status of Oiler products, and their related research.

What have we achieved

Our team has built and delivered hashrate (difficulty), base fee (gas price), and block gas limit binary options. These products have moved from the Alpha phase to Beta phase, and have given us a solid foundation for product design, and implementation. We did not stop there. Over the past few months, we have been working on building a new type of products — Blockchain Parameter Forward Contracts. These derivative products will allow various market participants to speculate, and/or hedge volatility risk associated with a specific blockchain parameter. Consequently, the target audience of each product will be different as various market participants will want to hedge different risks they are exposed too. For instance, exchanges face gas price risk as they need to withdraw customer funds on short notice. If gas prices are very high at the time customer requests withdrawal, they risk customer satisfaction by waiting for lower gas prices without any certainty that the gas prices will decrease in the next few minutes. While exchanges usually have no way of knowing how many withdrawals they will need to execute in the future, larger exchanges are usually able to approximate with pretty high certainty the minimum number of withdrawals they will need to execute. On the other side of this market, large miners and mining pools are able to predict that they will mine a block within a 30 minute time interval based on a confidence level, but they unfortunately have no way to ensure that the block they mine is full. Such customers could use the Blockspace Product to sell or buy Blockspace before it is even mined.

The Game Plan

When designing the latest version of Oiler’s roadmap, we wanted to put emphasis on Nafta and the Storage Verifier. As can be seen in the diagram above, these two dependencies are required for pretty much all four technical products being built.

Nafta

Although we do consider Nafta a dependency for all four products, we expect Nafta’s primary application to be loaning and collecting yield from NFT represented forward contracts within a secondary marketplace (or renting of course!). Why build it, and release it before it is needed? First off, we were certain that Nafta will be needed in the future. At the same time, we knew that our Solidity/Web3 team was being held up by the rest of the team which was focused on the Storage Verifier, and Forwards Product research. Getting started early essentially allowed us to keep the project moving until the highly anticipated Storage Verifier was ready. Today, the Nafta contract can be used by anyone to flash-loan, or flash-rent NFTs. The sky is the limit when it comes to Nafta’s possible use cases.

Storage Verifier

The Storage Verifier and the capabilities it offers are nothing short of game-changing for both Oiler, and the Ethereum ecosystem. What is the Storage Verifier and why is it so “game-changing”?

The Storage Verifier is essentially a set of contracts which enable cross-chain communication between StarkNet (Layer 2), and Ethereum (Layer 1). The contracts allow StarkNet to read the Ethereum state in a manner which does not compromise any security, making it possible to reliably read Ethereum state, and subsequently preform any necessary computation on StarkNet. Preforming complicated, computationally intensive calculations on Ethereum is currently very expensive. Offloading heavy computation to StarkNet will ultimately lower contract execution costs, but this is not the only advantage. The Ethereum Virtual Machine (EVM) has some built in limitations such as only being able to access the last 256 block hashes without having to store them in state or provide lots of RLP encoded headers (both of these options are quite expensive). As StarkNet allows us to read Ethereum state, this limitation is essentially removed as we can now look back as far as we want. To summarize, StarkNet key features are very cheap call data and cheap provable computations.

How does this apply to Oiler, and the products we are building? Let’s first take a look at what data we will need to access from the Ethereum state. We will need to read average state parameters such as:

Base fee
Difficulty
Number of ETH2 validators
ETH2 deposit contract balance

Furthermore, we need to be able to verify if a transaction is included in specific blocks, and read/process transaction receipts. Once we have this data, we will need to perform some heavy computation to make sure that each pool is properly collateralized, and is solvent. As you can see, Oiler Forwards will require a lot of call data and computations, two of StarkNet’s key features we have previously identified. The original Oiler Vision was to build a decentralized protocol for trading on-chain parameters with “no oracle hidden behind the layers of on-chain data sources”. StarkNet and the Storage Verifier will make this a reality by allowing us to fetch state data directly from Ethereum, and preform all required computation on StarkNet without compromising any security.

Doing it right

Designing the next generation of DeFi Protocols is not simple. It requires careful technical analysis but it spans far beyond just writing the required smart contracts. The technical implementation of a product (solidity, web3, security, etc…) is important, however, the economic feasibility of a product must also be carefully researched, and modelled. In other words, we need to carefully consider the incentives faced by each potential market participant and ensure that the market is fair for all. If this is not done correctly, we risk launching a product where one side of the market will be at a disadvantage and consequently would have no incentive to participate. So what are we doing about this? In order to ensure our products are economically feasible, Oiler has assembled a research group tasked with preforming the needed research and analysis on each of the four products found on the roadmap.

Taking a closer look at the roadmap, we can see that the Difficulty Forwards products is the closest to completion. We are very excited to release it! While we cannot give you a definite launch date, we hope the roadmap helps visualize the progress we have made, and the amount of work we still have ahead of us. After all the time we have spent building, and you have spent waiting, it is very important for us to get this done right!

The light ahead

As we approach 2022, we would like to reassure each and every one of our supporters that the Oiler team is working harder than ever to build a full family of blockchain parameter trading products. Our roadmap outlines a clear product end-goal, and the things we need to complete to get there. We intend to “continue bringing products — both new underlying blockchain parameters and new instrument types that will be related to the category of blockchain protocol trading”. Stay connected with us through our Twitter and Discord account, where we will be sharing more exciting announcements in the near future! Thank you for being with us on this journey.

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