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Curve Considers Implementing Solid Price Oracles to Reduce Reliance on External Protocols

As an active member of the Curve community, I am excited to hear about the possibility of reducing our reliance on third-party protocols. The introduction of LLAMMA has been a game-changer for the decentralized liquidity protocol, but the fact that it currently relies on an external oracle by Chainlink to operate its lending pools has been a sticking point for some members of the community. The idea of implementing solid price oracles in select pools with deep liquidity is an intriguing one, and I believe it has the potential to further enhance Curve's capabilities.

LLAMMA: A Revolutionary Algorithm

Before we dive into the potential benefits of reducing our reliance on external oracles, let's take a moment to appreciate the innovation that is LLAMMA. This algorithm, which combines both a traditional lending pool with an automated market maker (AMM), has fundamentally changed the way liquidity is provided on Curve.

In simple terms, LLAMMA allows for collateral to be gradually liquidated over a price range, rather than simply at one price. This means that users can benefit from more efficient liquidations, reduced slippage, and improved capital efficiency. By utilizing the AMM model, LLAMMA also ensures that liquidity is always available, even during periods of high volatility or low market depth.

The Challenge of External Oracles

Despite the many benefits of LLAMMA, the fact that it currently relies on an external oracle by Chainlink to operate its lending pools has been a source of concern for some members of the Curve community. This is because external oracles can introduce a number of challenges, including:

  • Centralization risk: If a single oracle is used, it becomes a single point of failure, which can result in the entire system being compromised if the oracle is attacked or compromised.
  • Security risk: External oracles are only as secure as the data sources they rely on. If a data source is compromised or manipulated, the oracle's output can be inaccurate, which can lead to incorrect actions being taken by the system.
  • Cost: External oracles can be expensive to use, especially if multiple oracles are required to ensure redundancy and accuracy.

The Potential Benefits of Solid Price Oracles

Given these challenges, it's understandable why some members of the Curve community are interested in exploring the possibility of reducing our reliance on external oracles. One potential solution that is being considered is the implementation of solid price oracles in select pools with deep liquidity. This would involve using a trusted data source to provide accurate price feeds, rather than relying on external oracles.

There are several potential benefits to implementing solid price oracles, including:

  • Increased security: By relying on a trusted data source, the risk of the system being compromised is significantly reduced.
  • Improved accuracy: Solid price oracles can provide more accurate price feeds than external oracles, which can lead to more efficient liquidations and reduced slippage.
  • Reduced costs: By using a trusted data source, the cost of operating the system can be significantly reduced.

The Future of Curve

While the decision to implement solid price oracles in select pools with deep liquidity is still being debated within the Curve community, I believe it's a step in the right direction. By reducing our reliance on external oracles, we can further enhance Curve's capabilities and ensure that the system remains secure and efficient. As a member of the community, I look forward to seeing how this discussion unfolds and what the future holds for Curve.


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