"Oracle-less protocols will disrupt the significance of Oracle price feeds."
This statement is WRONG.
Instead, they will coexist and increase utilities in DeFi.
Let's explore 5 new oracle-less protocols from @BinanceResearch and my thoughts on this primitive 🧵.
This thread will cover:
1️⃣ A Quick Refresher on Oracle
2️⃣ Why Oracle-less
3️⃣ Oracle-less Lending
4️⃣ Oracle-less Derivatives
5️⃣ Oracle-less NFT
6️⃣ Scoring + My thoughts on how to play this primitive
1️⃣ A Quick Refresher on Oracle
99% of dApps work like "when 🤖 occurs, 👻 is triggered."
🤖 could be any action, e.g. ETH price hits xxx, LTV goes below xxx.
Every action needs data as a reference.
And oracles connect on- and off-chain worlds and provide references.
2️⃣ Why Oracle-less?
However, a lot of hacks and exploits occurred due to oracle price manipulation.
More people started to realize that oracles can become vulnerable to attacks.
By implementing an oracle-less design, it will permanently eliminate this attack vector.
I will divide oracle-less protocols into 3 categories:
• Oracle-less Lending
• Oracle-less Derivatives
• Oracle-less NFT App
3️⃣ Oracle-less Lending
It falls into 2 categories:
3.1/ Peer-to-Pool Model
3.2/ Peer-to-Peer Model
3.1/ Peer-to-Pool Model
@ajnafi has been live for two months now.
It doesn't rely on external price feeds to function, which eliminates the attack vector on the protocol.
How liquidation works:
▶︎ Lenders: Set an active range for their liquidity.
▶︎ Borrowers: Informed by the input from borrowers.
▶︎ Liquidators: Trigger liquidation by posting a 'bond'; essentially, it's a bet on the debt. They could be in gain or loss.
3.2/ Peer-to-Peer Model
@pwndao is a peer-to-peer lending protocol designed to support multiple types of assets.
It's basically a marketplace to loan out assets based on an agreement.
Lenders and borrowers need to understand the terms and risks before starting the loan.
Example:
This guy tries to offer Lil Pudge to get the 2,000 RLB and will return the amount back in 60 days.
Upon maturity, borrowers can either repay the loan with interest or, in the case of a default, lenders can claim the pledged collateral.
4️⃣ Oracle-less Derivatives
I've been mentioning a lot of protocols in LPDFi territory.
I recommend everyone checking out this thread. It will help you onboard how derivative protocols will no longer need oracle in the future.
twitter.com/0xTindorr/status/1705265145415598278
5️⃣ Oracle-less NFT App.
Blend by @blur_io and @NFTfi are the leaders in this area.
They are a marketplace connecting borrowers and lenders, enabling loan activities and increasing NFTs' use cases.
User flow:
▶︎ Lenders pick the collection on which they prefer their ETH to be utilized.
▶︎ Set an amount of ETH and APY they prefer.
▶︎ Borrowers match the deal.
▶︎ Both of them have the right to close the credit terms (using the Dutch auction on the lending side).
6️⃣ Scoring + My thoughts on how to play this primitive
🥉 Oracle-less Lending: 4/10
They will likely struggle to gain traction due to its misalignment with user behavior, as users prefer the ability to put liquidity to work immediately.
🥇Oracle-less Derivatives: 8/10
I believe that the risk profile is well-suited for all stakeholders. Nevertheless, we should not overlook our industry's previous failure to drive widespread adoption of structured products.
Protocols must prioritize achieving Product-Market Fit
🥈Oracle-less NFT Lending: 6/10
It's evident how people went wild for Blend. Now, we must wait and witness the resurgence of the NFT narrative.
I firmly believe that if it rebounds, there will be a surge in the number of individuals using digital collectibles as collateral.
The main concept of this thread is inspired by @BinanceResearch. I highly recommend everyone to give it a read, as it will provide new perspectives on protocols.
twitter.com/BinanceResearch/status/1707318049148170443