Chainlink provides a way to integrate price feeds into the Ethereum blockchain that is secure, trustable, and decentralized. On Wednesday, Chainlink’s oracle technology was integrated into the synthetic asset platform Synthetix to power its smart contracts.
Synthetix is one of the largest dApps on Ethereum. It was built to host synthetic on-chain assets, or “synths” — ERC-20 tokens that mirror the value of real-world assets such as stocks and indices. Once relatively unknown, Synthetix has since been compared to a decentralized version of the successful derivatives exchange BitMEX and was Australia’s largest ICO under its former name, Havven.
Before integrating Chainlink, the platform relied on centralized oracles (automated price feeds), which produced occasionally catastrophic results. Last June, so-called frontrunning bots exploited one of those feeds by reading the next update and inserting a transaction ahead of it, extracting nearly a billion dollars in risk-free value.
Kain Warwick, the founder of Synthetix, explained that writing secure and accurate off-chain data to the blockchain was a critical challenge for the project. The team needed censorship resistance along with end-to-end security to support decentralized finance (DeFi) use cases.
Being able to use financial products without relying on a central party is the purpose of DeFi. The Chainlink integration ensures that a distributed set of participants is incentivized to provide accurate price information.
Rather than trusting a single team, users trading on the Synthetix Exchange will rely on incentives for distributed price discovery. Chainlink secures smart contracts that depend on external data by sourcing price information not from a single centralized party, but from a pool of independent nodes backed by economic incentives.
The first wave of assets to benefit from the new system includes fiat currency pairs and commodities. Synthetix users will be able to trade the following pairs: AUD/USD, EUR/USD, CHF/USD, GBP/USD, JPY/USD, XAU/USD, and XAG/USD.
Decentralizing the maintenance of data feeds is one of the next major steps for DeFi, and we’re excited to enable that level of decentralization for a market-leading decentralized application like Synthetix.
said Chainlink co-founder Sergey Nazarov in a statement.
Synthetix says it will continue collaborating with Chainlink to add more synthetic assets in the future, including cryptocurrencies and indices. The project also plans to enable its community to request new asset price feeds on demand, further decentralizing the platform’s data infrastructure.
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