Teddy Cash Integrates Chainlink Price Feeds to Bring Capital-Efficient Lending to Avalanche
Teddy Cash is excited to announce that we have integrated the Chainlink Price Feeds on Avalanche mainnet to help secure collateral, redemptions, and liquidations. The integration involves the use of the AVAX/USD Chainlink Price Feed to fetch the most current price data during core protocol functions such as taking out loans, redeeming TSD, and triggering liquidations of under-collateralized positions. Integrating the industry-leading oracle solution will help ensure that the prices referenced within Teddy Cash are reliable and tamper-proof, protecting users against oracle manipulation attacks and other outlier events, such as flash crashes, flash loan attacks, and exchange downtime.
Teddy Cash is a decentralized lending protocol on Avalanche that allows users to draw interest-free loans against AVAX collateral, known as Troves. Loans are paid out in Teddy Dollar (TSD) and need to maintain a minimum collateral ratio of 110%. In addition to the collateral, the loans are secured by a Stability Pool and by fellow borrowers collectively acting as guarantors of last resort. These mechanisms allow for a low collateral ratio compared to other lending protocols and greater capital-efficiency for borrowers.
Such a low collateralization ratio isn’t feasible in other protocols due to the time it takes to liquidate positions. If the value of the liquidated collateral drops too quickly, the debt may not get settled and the entire system may be at risk of under-collateralization. Teddy Cash solves this problem using the Stability Pool, which is the first line of defense in maintaining system solvency. The Stability Pool ensures that the TSD supply always remains backed by acting as the source of liquidity for repaying debt from liquidated Troves. In addition, if the Stability Pool is empty during a liquidation, the system uses a secondary liquidation mechanism called redistribution, where debt and collateral from liquidated Troves is redistributed to all other existing Troves.
A fast and secure oracle network delivering a reliable AVAX/USD price feed is critical for the Teddy Cash system. If the oracle uses a single source for data delivery, gets compromised, becomes unresponsive, or otherwise provides faulty information, the entire protocol could be at risk.
We selected Chainlink because it is the most time-tested decentralized oracle solution, backed by high-quality data, secure node operators, and a robust reputation framework for proving the security and performance of its systems. By leveraging Chainlink, Teddy Cash’s AVAX/USD reference price is secured by a decentralized network of independent, Sybil-resistant oracle nodes run by leading blockchain DevOps with a proven track record of high availability and tamper-proofness in their delivery of data on-chain. These Chainlink nodes source data from numerous independent, high-quality data aggregators like BraveNewCoin and Amberdata, meaning there are multiple data sources that each represent a volume-weighted price aggregated from all relevant centralized and decentralized exchanges. This sourcing method is key because it prevents outlier price data on single exchanges from corrupting the aggregated price referenced by Teddy Cash during the creation of Troves, redemption of TSD, and execution of liquidations. As a result, Teddy Cash will consistently issue loans and redeem TSD at fair market value, as well as keep the protocol fully collateralized and solvent.