The Role of Decentralized Oracles in Times of Crypto Market Volatility

CryptoMode Decentralized oracles

It’s no secret that the crypto market is in a state of turmoil right now, as is made evident by the fact that over the course of the last seven odd months, the total market capitalization of this industry has dipped by a staggering 70%, dropping from its all-time high of $3T back in November 2021 to its current levels of approx. $935B.

To elaborate further, the decentralized finance (DeFi) market, hailed as one of the most fascinating innovations to have emerged from the realm of crypto tech, too has been faced with an insane amount of bearish pressure recently. Following the Terra debacle, which saw the $40B algorithmic stablecoin project crumble almost overnight, a number of popular DeFi lending platforms including Celcius, Babel Finance have been faced with massive liquidity crunches as a result of the insane volatility that permeated the market. 

In this regard, over the past 45 days or so, over $120B has exited the global DeFi ecosystem, resulting in the total value locked (TVL) within the space dipping from $215B to $74.95. Not only that, just recently it came to light that prominent crypto-focused VC 3 Arrows Capital — with $10B worth of assets under management —  is facing insolvency. These developments have sent the market into a state of frenzy with prices across the board fluctuating on a day-to-day basis.

High-quality crypto oracles are more important now than ever

Since the start of May, the digital asset market has been all over the place, with the net valuation of this space fluctuating by 5% – 10% on a daily basis. To this point, discrepancies in the prices of various coins have emerged recently. For example, earlier this month, there was a major gap between the reported price of the assets underlying Luna Classic and its synthetic assets on the DeFi platform Mirror Protocol resulting in miscreants exploiting this monetary differential.

Other DeFi platforms such as Venus Protocol and Blizz Finance too have been targeted by exploiters in a similar fashion over the last couple of weeks. The hackers were able to manipulate the discrepancies in the actual price of their listed tokens and the price reported to them by their respective price oracles. As a result, Blizz Finance’s funds were completely depleted, while Venus Protocol recorded substantial losses worth approximately $11.2M.

Thus, it stands to reason that in order for the DeFi market to succeed and grow, it needs to have at its base, accurate price feeds supplied by oracles which are completely decentralized and cannot be manipulated. QED is one such option. It is a decentralized oracle that features a highly robust economic/governance framework that helps connect a host of different blockchain networks, smart contract platforms and off-chain data resources with one another seamlessly. QED makes use of external collateral instead of native tokens as incentives for honest data reporting among oracles, allowing for situations like the ones mentioned above to be bypassed completely.

Furthermore, the project seeks to maintain its amazing transparency levels by distributing data points through a host of digital entities. On a more technical front, QED is head and shoulders above even its closest rivals such as Chainlink when it comes to price accuracy, finality, network resilience, security, etc. For example, QED’s data refresh rate stands at 0.5s while Chainlink’s lay at 120s. Not only that, when it comes to transaction finality, QED’s technicals lay between 3-5 seconds, superseding even those of specialized projects like SupraOracles.

Another option worth considering in this regard is Witnet, a decentralized oracle network (DON) meant to connect smart contract platforms with real-world data sources. The ecosystem affords third parties the ability to record info that may have been issued by any web address at any given point of time, that too with verifiable proof of the data’s veracity. 

Decentralized price feeds FTW

As the global economy continues to be ravaged by a growing amount of uncertainty — thanks, in large part, to central banks all over the world raising interest rates — it is essential that when it comes to accurate price reporting, especially within the realm of cryptocurrencies, that high-quality oracles are used. 

Thus as we head into a future driven by decentralized technologies, it will be interesting to see how the future of this ever-evolving space continues to play out.

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