Kraken Launches Chainlink Node to Provide Spot Price Data for DeFi Markets
Kraken is looking to use Chainlink to improve market transparency. Oracle miscalculations are still a significant problem for DeF protocols, and the industry needs to overcome them as it moves for broader adoption.
2020 saw the decentralized finance (DeFi) ecosystem grow into an emerging finance space.
With the market barely losing steam in 2021, several popular names in the crypto space are making overtures to lure inventors.
Major crypto exchange Kraken would run a Chainlink node to provide spot price data to DeFi applications, per a company blog post. The top cryptocurrency exchange explained that the move would improve data accessibility in the DeFi sector, which will help applications and protocols run more efficiently.
As the company post explains, a dedicated Chainlink node will help Kraken broadcast its Oracle Rates to any blockchain. The node will help Kraken to take price data from its spot markets, where digital assets are ideally sold and bought, and publish them on blockchains for DeFi protocols.
Kraken explained that it is looking to combat price manipulation effects, one of the primary challenges of DeFi protocols, which originates from faulty or deliberately inaccurate data from blockchain oracles. The exchange hopes that by providing its spot prices through Oracle Rates will improve transparency in the DeFi and traditional crypto space. The release pointed out,
“Our spot price-based Oracle Rates can be used to obtain real-time data feeds that power a wide range of decentralized applications, such as derivatives contracts, lending applications, cross-border payments, stablecoins, automated asset management protocols, and more.”
No Place for Small Errors Anymore
Price manipulation is one of the most pressing concerns facing DeFi platforms. With these platforms dependent on blockchain oracles for their operation, faults could lead to significant problems and create an opportunity for unsavory characters to cheat other network participants. This is what makes blockchain networks like Chainlink crucial.
The blockchain oracle has also seen increasing integration of late. This month, Warp Finance, a DeFi lending protocol, announced the inclusion of Chainlink's oracles as part of its service. The protocol notably suffered a hack last month, following a series of flash loans on its platform. Losses were estimated to be between $1 million and $8 million.
In its release, Warp Finance explained that the hack was compounded by its use of liquidity provider tokens for collateral. While that feature was a major selling point, it turned out to be an undoing as well.
Emiliano Bonassi, a DeFi whitehat hacker, explained that the exploit had relied on Warp Finance and their inability to calculate the value of the pool's tokens properly. Looking to fix that, Warp will use Chainlink price feeds for all essential functions – especially the value of liquidity provider (LP) tokens used for collateral.