- Price oracles are vital for borrowing and lending applications across DeFi
- Cosmos has a broad range of development activity, but this basic piece of infrastructure is currently lacking
Umee, a Cosmos-based borrowing and lending platform, is weeks away from launching the first price oracle service for Cosmos’ Interblockchain Communication (IBC) protocol, the company announced Thursday. The oracle, called Orion, will be provided by the Umee blockchain’s validators which run software that will automatically pull pricing data from a set of centralized exchanges, plus the Osmosis dex.
For any smart contract to make use of data not running on its own blockchain, it needs to rely on a third-party service — an oracle. Typically used to query price data, the oracle acts as an intermediary between the smart contract and off-chain sources — in the case of Umee’s Orion, initially about a half dozen exchanges such as Coinbase and Binance.
“Cosmos has a lot of DeFi, but there’s not a single oracle that works for IBC tokens,” Umee CEO Brent Xu told Blockworks.
Neither Chainlink — the largest oracle network on Ethereum — nor Band Protocol which, although based on the Cosmos SDK, is focusing on cross-chain use-cases, has implemented a price oracle for Cosmos native assets.
Projects that need accurate prices have been finding workarounds, but they aren’t as reliable or trustworthy as a decentralized oracle network, where many participants checking multiple data sources need to reach consensus and are economically penalized if they screw up — a mechanism known as slashing.
A rock-solid price feed is essential for borrowing and lending applications, like the one Umee is preparing to launch, and its platform will be the new oracle’s first “customer.” But the service will be available to others. Shade Protocol — expected to launch later this year — which specialized in privacy-preserving DeFi applications built on another Cosmos-based chain, Secret Network, is one likely Orion user, Xu said.
IBC allows chains built on Cosmos to relay information about their own accounts and transactions, collectively known as “state.” But it can also be used to create transactions that modify the state of other Cosmos chains.
Xu explained: “What’s special about our oracle is that every time we take price information, it’s the equivalent of an IBC transaction happening [on] the chain, and what we can do is we can allow these IBC transactions to transact information from the Umee blockchain to any other Cosmos blockchain out there as pricing data.”
Umee’s full validator set will pass the price data along about every 30 seconds. Each validator submits the price independently to prevent collusion and guarantee accuracy, Xu said.
The oracle will go live next month alongside a major upgrade to the Umee protocol, but has been rigorously tested on a test network already.
“We just pushed the oracle to its limits,” Xu said, noting that the testnet processed 30 million transactions from 120,000 unique addresses — at a rate of up to 50,000 transactions per second. Testnets are designed to find potential bottlenecks or problems before software has to handle real value in a production environment.
“There’s no Cosmos app in history that has undergone this many transactions…we’re pretty proud, we really put the Cosmos infrastructure through its paces.”
That level of throughput may not be needed today, but smart contract applications are still in their nascency across the ecosystem.
“With the development of several new DeFi protocols in Cosmos, the ecosystem is in need of an IBC native price oracle that allows cross chain pricing data to be transferred safely across networks,” Peng Zhong, former CEO of Ignite, noted in a statement.
Xu pointed to the recent shakeup at Ignite — formerly Tendermint Inc, home to the original contributors of the Cosmos SDK — as evidence of the ecosystem’s decentralized development prowess.
“There’s at least like 20 or 30 different teams building out core Cosmos SDK code. And so what’s really unique is that I don’t think there’s one team that completely centrally controls Cosmos development. It’s already so distributed that even if Ignite goes through this weird restructuring, the Cosmos space is going great.”
Blockworks contacted representatives of Chainlink, Band Protocol and Shade Protocol, but did not receive a reply by press time.