The Oracle Knows: Selecting Chainlink to source on-chain pricing for layer-one assets that we wrap on Ethereum
Today, we’re excited to announce that we’ve selected Chainlink Price Feeds as a go-to oracle solution for accurately pricing layer-one assets that we wrap and deploy onto the Ethereum blockchain. Using Chainlink Price Feeds will enable wrapped assets on Ethereum to be priced on-chain within Ethereum dapps, such as when they’re used for collateral in lending markets or native payment within other external services.
We’ve selected Chainlink because it’s a mature, easy-to-integrate, and historically reliable oracle solution in the industry for sourcing accurate, tamper-proof price feeds on-chain. Through its decentralized network of Sybil-resistant nodes and premium data providers, Chainlink’s high-quality data feeds are provably resilient against various unexpected situations like API downtime, flash crash outliers, and data manipulation attacks via flash loans.
We’re excited to leverage Chainlink technology, the most mature oracle solution on the market, as we continue to deploy wrapped assets into the defi ecosystem. #linkmarines
– Mason Borda, CEO of Tokensoft
How Chainlink sources price data for Wrapped
DeFi never sleeps. The market is always open, news is always breaking and something is always happening — especially with prices.
At Wrapped, it’s critical to our operations to ensure that this price information is accurate. Since all wrapped assets are fully backed 1:1 with their underlying using a qualified custodian, knowing that the price of a wrapped asset maintains its peg to its underlying is one of the most important things alongside its security.
Not only is it important to monitor the peg of wrapped assets, but decentralized applications utilizing wrapped tokens need accurate price information to perform critical on-chain functions like checking loan collateralization or getting exchange rates.
Prices are a reflection of the aggregate price discovery happening across a multitude of centralized and decentralized exchanges. Prices and volume can vary across them, especially at times of increased volatility. Redundancies and volume weighting are important here, as a single pricing inconsistency can lead to a catastrophic domino effect throughout many systems that are relying on that price.
The most reliable way to collect this information is through a blockchain oracle. The oracle formats the data into a blockchain-readable format, signs it to prove its provenance, aggregates it across multiple sources, and delivers it on-chain as a single price update.
Using Chainlink Price Feeds powered by decentralized oracle networks
Chainlink Price Feeds are decentralized oracle networks that store the current volume-weighted average price (VWAP) of cryptocurrencies in on-chain reference contracts, which are continually updated in order to closely follow volatility. We decided to integrate Chainlink Price Feeds because they are an incredibly robust oracle solution for price reference data, already securing tens of billions of dollars across leading DeFi projects and providing all the price information we need to wrap and unwrap assets.
Some of the unique benefits of integrating Chainlink include:
- High-Quality Data — Data is collected from numerous premium data aggregators, leading to price data that’s aggregated from hundreds of exchanges, weighted by volume, and cleaned from outliers and wash trading.
- Secure Node Operators — Independent, security-reviewed, oracle nodes are run by leading blockchain DevOps teams, data providers, and traditional enterprises with a strong track record for reliability during extreme network congestion.
- Decentralized Network —Data is decentralized at the source, and oracle network levels, generating strong protections against downtime and manipulation.
- Reputation —A robust reputational framework and set of on-chain monitoring tools allows users to independently verify the historical performance of node operators and oracle networks, as well as check the real-time prices being offered.
More about Chainlink
Chainlink is the industry standard oracle network for powering hybrid smart contracts. Chainlink Decentralized Oracle Networks provide developers with the largest collection of high-quality data sources and secure off-chain computations to expand the capabilities of smart contracts on any blockchain. Managed by a global, decentralized community, Chainlink currently secures billions of dollars in value for smart contracts across decentralized finance (DeFi), insurance, gaming, and other major industries.
Chainlink is trusted by hundreds of organizations, from global enterprises to projects at the forefront of the blockchain economy, to deliver definitive truth via secure, reliable oracle networks. To learn more about Chainlink, visit chain.link or subscribe to the Chainlink newsletter. To understand the full vision of the Chainlink Network, read the Chainlink 2.0 whitepaper.
More about Wrapped
Wrapped lets investors use their digital assets to lend, borrow, and trade on all major DeFi platforms. Each wrapped asset is fully-collateralized and held with a qualified custodian. Learn more by visiting https://wrapped.com.