Coinbase is trying to fix the broken DeFi industry with stable price oracles.
In an April 23 announcement, Coinbase introduced the Coinbase Price Oracle — “a critically important service to the DeFi ecosystem” that will be available through the CoinbasePro API.
Both existing ways are worse
Coinbase contends that the two existing approaches to price data feeds for DeFi — “published signed data” from a centralized source or using a price feed coming from a decentralized exchange — are both unsatisfactory:
“Using data from an off-chain source requires trusting the publisher to post correct prices and keep the signing key safe — the latter historically has proven to be a difficult problem, especially when stakes are high. Similarly, relying on DEX-generated on-chain feeds exposes protocols to various novel attack vectors yet to be fully explored.”
Coinbase states that its approach to price oracles combines the best of both worlds — it has a reputation as “one of the most liquid” exchanges and offers data authenticity guaranteed by signature from Coinbase’s private keys:
“Anyone can publish the prices on-chain and since the data is already signed by Coinbase’s private key, there is no need to trust the publisher. Using the Coinbase Price Oracle public key, anybody can verify the authenticity of the data.”