Coinbase, one of the major American cryptocurrency exchanges, launched a signed data feed option last week.
Called Price Oracle Coinbase’s signed data feed provides a critically important service for growing decentralized finance (DeFi) ecosystem, says the official report. The new solution aims to help eliminate the risk of DeFi protocols, that use third-party off-chain data which might be unverified and thus not accurate.
According to the official post, anyone can use the Price Oracle Application Programming Interface (API) to get signed price data for trading pairs of Bitcoin (BTC) and Ether (ETH) against the US dollar. The price feed is sourced from Coinbase Pro cryptocurrency exchange and updates each minute.
The data is signed by Coinbase’s private key, meaning that if anyone publishes then the data will be verified as being from the exchange. Meanwhile, Coinbase’s public key allows anyone to verify the authenticity of the data.
Digital asset price data issues
The trusted price data is used for various decentralized finances (DeFi) projects to carry out functions like margin trading, lending, liquidations or derivatives.
Since the decentralized finance ecosystem expanded over the past few years, it became one of the major use-cases for cryptocurrencies. Currently, the DeFi protocols and decentralized applications operate on nearly $1 billion worth of digital assets. According to the official post:
In many of these protocols, there is a reliance on trusted price feeds, that need to report on asset prices in order for the protocol to function.
According to Coinbase, the Oracle was created to help DeFi get trusted digital asset price data. As it is reported, currently digital asset prices are available for DeFi only by publishing signed price data from an off-chain source like an exchange or by using prices from algorithmic decentralized exchanges such as Uniswap or Kyber.
However, both ways have major trust issues. As stated in Coinbase’s post, data usage from off-chain sources requires trusting the publisher to post correct prices and keep the signing key safe”. Relying on DEX-generated on-chain feeds expose protocols to possible attackers.
Meanwhile, Coinbase Price Oracle will be integrated into Coinbase’s secure infrastructure. The company expects, it will make help reduce risks and make a decentralized finance ecosystem safer, as well as contribute to its further adoption.