Compound Protocol to Roll Out Decentralized Oracles Dubbed ‘Open Price Feed’
Compound, one of the most popular defi protocol, is all set to introduce open price feeds for lending on its platform using a decentralized oracle. This decentralized oracle would offer live price feeds, which would make the lending process more simplified. Open price feeds are being tested across several blockchain network including Ethereum (ETH) Kovan and Ropsten testnet. The open price feed has been live on the mentioned testnet for almost two weeks now.
Compound’s developer community has appealed to the members to come together and test the new open price feeds on the platform so that the developers can integrate it into the protocol as early as possible.
How Does Open Price Feed Work?
Open Price Feed system relies on permissionless price reporters and posters, where exchanges act as a reporter (earlier Coinbase Pro was the only exchange acting as a reporter). The reporter is responsible for signing the price feeds regularly with their public key. After reporters sign the price feed, posters would be responsible for pushing out the signed price feeds. Posters in this system are permissionless, which means anyone can become a poster if they like.
Apart from Coinbase Pro as the reporter, the system also makes use of on-chain Uniswap V2 price feed as a fallback or to verify the price feeds signed by Coinbase Pro. Uniswap is called an anchor in this system and makes sure that the data does not deviate from the market value. If the on-chain data signed by reporter differ by more than 20% for 30-60 minutes, in that case, off-chain data would be ignored.
Many other price data feed providers would join the network via governance token COMP. It is also believed once Compound aggregates enough price feeds from multiple trustworthy sources, the use of Uniswap price feeds would be discarded altogether.
Compound launched its protocol token back in June using which people can participate in the on-chain Protocol decision. 50% of these tokens would be distributed via liquidity mining incentive program. At the same time, the remaining 50% token would be distributed among early investors and developers.