DeFi protocols and stablecoins are joned atthe hip. Usually, the DeFi ecosystems get boosted by stablecoins. What’s new is an oracle-backed protocol having support from a DeFi stablecoin.
Aave recentntly activated support for its GHO stablecoin, backed by RedStone Oracles.
Jakub Wojciechowski, Founder at RedStone Oracles, explains…
Jakub Wojciechowski, Founder at RedStone Oracles
- What impact do decentralized stablecoins have on the DeFi markets?
“The DeFi space typically prefers decentralised stablecoins, especially CDP style. For example, in DeFi, USDC is preferred over USDT as it’s more transparent.”
- What roles do Oracles play in the process?
“Oracles price collateral used to mint CDP style stablecoins, while delivering the price feed of stablecoins to other DeFi protocols, as they’re not always $1, often they deviate slightly by 0.001% or more significantly like 0.1% or even more.”
- What are crosschain oracles?
“Historically Oracles were designed to operate on a specific network, for example Chainlink started with an infrastructure created on Ethereum and then duplicated it to other chains. It’s possible to achieve this but not in a scalable way, due to the fact that for this type of infrastructure an Oracle has to push the same data to many chains and cover the gas cost of on-chain storage on all of them. Crosschain Oracles like RedStone are compatible with multiple networks by design. For example developers can use RedStone on each and every EVM-compatible Layer 1, Layer 2, and even Layer N network as our model attaches signed data packages to users transactions’ call-data, so it doesn’t matter which network it ends up at.”
- Can you tell us about oracle support for Aave’s GHO stablecoin?
“We’re the first Oracle to deliver GHO price feed, ensuring accurate and reliable pricing information for users and platforms relying on GHO’s value, such as DeFi protocols, smart contracts, and decentralized applications. Price discovery is transparent and our sources can be found here, we utilise Balance and Uniswap DEXes.”
- How will the integration affect GHO’s stability?
“We do not impact GHO stability but rather provide price feed for GHO to other protocols. By its very nature as a stablecoin, GHO itself fluctuates slightly as mentioned previously.”
- What measures are in place to prevent price manipulation and sudden attacks on the stablecoin?
“We pull data only from sources with at least $1M liquidity and have implemented extensive monitoring services to act upon market changes and conditions.”
- What role does the price feed play?
“Oracle price feed is necessary for DeFi platforms like Aave, Compound, Frax Lending, GMX and others to price the collateral properly and avoid bad debt – a loan where collateral is valued less than the borrowed amount.”
- Following the failures of other DeFi stablecoins, do you think Aave’s GHO will survive?
“Yes, GHO has a robust design and some of the most seasoned and decorated stakeholders in Web3 from the Aave team are behind it.”
- How does the Aave team maintain its stability?
“Aave maintains stability by setting up accurate parameters and active monitoring of liquidity sources while allowing collateral types that are secure enough to mint GHO against.”
- What is the RedStone Data Distribution Layer?
“It’s an off-chain component where signed data packages are available for any protocol to pick up and utilise on EVM-compatible networks.”
- What are the benefits of keeping data packages within RedStone’s Data Distribution Layer?
“It’s simply cheaper, as one does not have to pay gas fees on blockchain to keep data, which is expensive. By keeping signed data packages in the RedStone Data Distribution Layer and delivering them according to conditions set by dApps, gas costs can be reduced by up to 90% while achieving sub-second price feed latency on high-performance ecosystems. We also ensure high security guarantees – signatures of data providers by each delivered data package.”
- What are the risks of inaccurate pricing of digital assets?
“Bad debt, so imagine a loan where collateral is worth less than the position taken out from a protocol by a user, so the user has no incentive to pay off the loan.”
- How effective are oracles?
“We are focused on modular oracles, allowing for more customisability from a developer point of view. In addition to being cross-chain by design, RedStone is optimised for gas cost consumption, offering a significantly cheaper option than traditional oracles.”
- How does human interaction improve oracle performance within decentralized ecosystems?
“Human interaction enables greater monitoring, security guarantees, audits, while facilitating crash tests.”
- What is the impact of improved data resilience?
“Greater levels of data resilience make it harder to manipulate and hack a protocol.”
- What steps have you taken to prevent price slippage?
“We’re currently working on a multidimensional Oracle where we deliver information around how much assets a protocol can liquidate by a given price i.e. you can sell 10 ETH of a loan for $2000 and the next 20 ETH for $1900, so effectively the whole hypothetical loan of 30ETH can be sold for 10*2000 + 20 * 1900.”
- What is new about your oracles?
“We are pioneers of On-Demand Oracles where signed data packages are dynamically injected into users transactions’ call-data whenever they interact with a dApp, hence diminishing the cost, increasing scalability of the Oracle and upholding the highest security standards.”
- What roles do your oracles play in GHO’s borrowing and lending activities?
“We price GHO for other protocols i.e. Sommelier, Y2K, Sturdy.”
- What are your plans for the second half of the year?
“New protocols will be integrating RedStone, and we’re preparing a Real World Assets (RWA) report. We also have plans to expand to new chains – currently we’re working on TON chain integration – and attending events ETHWarsaw, dAppCon in Berlin, Messari Mainnet, as well as DevConnect.”