Saffron Integrates Chainlink to Settle and Manage Tranches
We’re excited to announce that saffron.finance has integrated market-leading oracle solution Chainlink on Ethereum mainnet to access secure and reliable on-chain reference prices used to settle and manage liquidity for various tranches. Our initial integration involves reading Chainlink’s decentralized Price Feeds for WBTC/USD with further expansion into ETH/USD, BTC/USD, and DAI/USD in the future.
We selected Chainlink because of its position as a time-tested and battle-hardened oracle solution backed by high quality data and wide market coverage. Chainlink has proven to be reliable as a secure decentralized infrastructure provider even during extreme gas prices and centralized network outages (i.e., Infura and exchange downtime).
Understanding Saffron and Its Need for Oracles
Our web3 app, saffron.finance, is a decentralized application that allows liquidity providers to get various degrees of exposure depending on their risk/reward appetite. The Saffron protocol acts as a liquidity aggregator where users tokenize their underlying assets for a certain time period (referred to as an epoch), with those underlying assets then getting dynamically deployed into various lending protocols to earn interest. LPs can choose between various LP deployment strategies called “tranches”, which take on various degrees of risk (i.e., impermanent loss) and reward (i.e., interest rates). Users can then trade their tokenized tranches with others, effectively cultivating an interest rate swap market for the DeFi community.
Currently there are two tranches to choose from:
- A Tranche: LPs adding liquidity to the A tranche earn more interest but lose their principal and interest earnings in case of loss from platform risk.
- S Tranche: LPs adding liquidity to the AA tranche earn less interest, but are covered in the case of loss from platform risk. That covered capital comes from the principal and interest earnings of A tranche LPs..
In order to ensure these tranches operate as coded in the smart contract, a secure and reliable oracle system is needed, particularly to trigger coverage payouts to tranche S from tranche A in a situation where impermanent loss, extreme price movement, and/or protocol failures occur in the underlying lending platforms.
Why Saffron Selected Chainlink to Secure Its Tranches
The oracle system is critical to the proper functioning of Saffron tranches. After evaluating various oracles, we found Chainlink to be the most secure, reliable, and precise decentralized price oracle network in the industry. Their dedication to building such robust oracle infrastructure is why they secure billions of dollars in on-chain value for a large ecosystem of users, including many prominent DeFi projects like Synthteix, Aave, and Yearn.
Each Chainlink Price Feed is secured by a decentralized network of independent, security reviewed oracle node operators run by leading blockchain DevOps and security teams. These Chainlink node operators each source data from multiple premium data aggregators like BraveNewCoin and Amberdata, which each provide a global, volume-adjusted market price reflective of market coverage from across all trading environments. The oracle network then aggregates numerous node responses to arrive at a single price update. Through such a setup, Saffron is able to get highly accurate, available, and tamperproof price data, which is inherently resistant to various types of price manipulation and inaccuracies, most notably flash crashes on centralized exchanges and flash loan attacks on decentralized exchanges.
By integrating Chainlink, saffron.finance users can feel confident in the proper settlement and liquidity provisioning of tranches. Additionally, we can leverage Chainlink’s established Price Feed framework to quickly and easily launch support for more assets in the future, as well as explore various other oracle solutions such as Chainlink’s Proof of Reserve functionality and utilizing Chainlink on other blockchains.
“By using Chainlink for the settlement and management of tranches, Saffron users now have a more secure and decentralized mechanism for deploying liquidity based on well-defined risk/reward strategies,” stated the saffron.finance team. “Backed by high-quality data and robust oracle infrastructure, Chainlink Price Feeds offer both an immediate solution for our current markets and a future solution for expanding the number of markets and adding innovative features to the platform.”
Chainlink is the most widely used and secure way to power universally connected smart contracts. With Chainlink, developers can connect any blockchain with high-quality data sources from other blockchains as well as real-world data. Managed by a global, decentralized community of hundreds of thousands of people, Chainlink is introducing a fairer model for contracts. Its network currently secures billions of dollars in value for smart contracts across the decentralized finance (DeFi), insurance and gaming ecosystems, among others.
Chainlink is trusted by hundreds of organizations to deliver definitive truth via secure, reliable data feeds. To learn more, visit chain.link, subscribe to the Chainlink newsletter, and follow @chainlink on Twitter.
Saffron is a protocol for tokenizing on-chain assets, including contracts that otherwise impair access to utilized capital. Tokenized ownership of on-chain assets gives liquidity providers greater flexibility and uninterrupted access to their underlying collateral while enabling leveraged staking and bespoke risk management.
Web3 app: https://saffron.finance