- Pricing oracles are key to borrowing and lending applications across DeFi
- Cosmos has extensive development activity, but this basic 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. An oracle, called Orion, is provided by Umee Blockchain’s validators, which runs software that automatically pulls price data from centralized exchanges, as well as Osmosis Dex.
For any smart contract to use data that doesn’t run on its own blockchain, it has to rely on a third-party service – Oracle. Often used to query price data, Oracle acts as an intermediary between the smart contract and off-chain sources — in the case of Umee’s Orion, initially about half a dozen exchanges like Coinbase and Binance.
“Cosmos has a lot of DeFi, but there isn’t a single oracle that works for IBC tokens,” Umee CEO Brent Xu told Blockworks.
While the largest oracle network on Ethereum is based on the Cosmos SDK, neither chainlink nor band protocol, focused on cross-chain use-cases, Cosmos has implemented a price oracle for native assets.
Projects that require accurate pricing are finding workarounds, but they aren’t as reliable or trustworthy as a decentralized oracle network, where multiple participants checking multiple data sources have to reach a consensus and are financially 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 first “customer” of the new Oracle. But the service is available to others. Shade Protocol — expected to launch later this year — is another Cosmos-based series specializing in privacy-preserving DeFi applications built on the Secret Network, which Xu said could be Orion users.
IBC allows chains built on Cosmos to transmit information about their own accounts and transactions, collectively known as a “state”. But it can 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 equivalent to an IBC transaction. [on] chain, and what we can do is we can allow these IBC transactions to be transacted from the Umee blockchain to any Cosmos blockchain as price data.
Umee’s full validator set transmits price data every 30 seconds. Each validator submits a price independently to prevent collusion and guarantee accuracy, Xu said.
Oracle will go live with a major upgrade to the Umee protocol next month, but has already been rigorously tested on a test network.
“We pushed Oracle to its limits,” Xu said, adding that the testnet processed 30 million transactions from 120,000 unique addresses — at a rate of 50,000 transactions per second. Testnets are designed to find potential bottlenecks or problems before the software performs real value in a production environment.
“There’s never been a Cosmos app in history that’s undergone so many transactions … We’re very proud that we’ve really put the Cosmos infrastructure through its paces.”
That level of throughput may not be necessary today, but smart contract applications are still springing up across the ecosystem.
“With the development of several new DFi protocols in Cosmos, the ecosystem is in need of an IBC local pricing oracle that enables the secure transfer of cross-chain pricing data across networks,” Peng Zhang, former CEO of Ignite, said in a statement.
Xu points to the recent shakeup at Ignite — formerly home to TenderMint Inc, an original contributor to the Cosmos SDK — as a testament to the ecosystem’s decentralized development prowess.
“There are at least 20 or 30 different teams building the core Cosmos SDK code. 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 fine.
Blockworks contacted representatives of Chainlink, Band Protocol and Shade Protocol, but did not receive a reply by press time.
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