Oracles in Decentralised Asset Management
In terms of asset management, there are two main factors that dictate whether a firm will be successful or not, performance and reliability. Within DeFi, there are many firms that offer high returns on investment, with little regard for the protocol’s security measures, especially with the use of oracles.
DEXTF is the leading oracle-less DeFi asset management protocol that empowers anyone to mint, trade, redeem and provide liquidity on non-custodial oracle-less tokenised portfolios (XTFs), whilst also working with large financial institutions and key opinion leaders to provide secure solutions to those seeking to create funds on-chain. Whilst there are certainly some firms within DeFi that offer tokenised portfolios, the oracle-less nature of DEXTF offers unrivalled security within the DeFi industry.
For those who are blissfully unaware of oracles, inbound oracles essentially connect data from off-chain sources to the blockchain. Due to blockchain being a self-contained system, the data provided by oracles offer blockchains or smart contracts the ability to interact with external, or real-world data. Many DeFi protocols have opted to use centralised price oracles, which draw pricing data directly from asset pairs on a single decentralised exchange (DEX). If a DeFi protocol relies on price data from a single DEX, any changes in that DEX’s price data – irrespective of if it accurately represents actual market data or not – are considered true and accurate by the protocol’s smart contracts. This places an immense amount of power on oracles in relation to smart contracts, as the pricing data received through oracles controls how a smart contract is executed, which in turn can influence a whole market.
Relating back to the main topic of security, they also offer attackers and exploiters a centralised and singular point of failure in an otherwise secure and decentralised system. This illogical level of trust placed on centralised oracles sacrifices any decentralisation-related perks a smart contract might benefit from and can even put a whole protocol and investor’s assets at risk.
Our team of experts believe oracles are vulnerable and expose serious security threats, and our case for oracle-less protocols is becoming increasingly convincing after multiple reports of oracle exploits, which have caused millions of dollars worth of losses for investors in seemingly promising DeFi projects.
A common way of exploiting price oracles has been through the use of flash loans to exploit vulnerabilities in centralised price oracles, manipulate assets’ prices and funnel funds from contracts away from investors and into the pockets of attackers. By loaning massive amounts of assets, an exploiter can manipulate the price of an asset on that single DEX, which will lead to inaccurate pricing data being fed to all protocols which rely on that DEX as a price oracle, making them vulnerable to exploitation. For example, exploiters might be able to pump the price of a tokenised fund using flash loans, use a function that checks the price oracle, “burn” the fund token for its (inflated) underlying assets, finally repaying the flash loans, and coming away with millions in stolen funds.
The reliability and security of DEXTF is clear, we have invested heavily in price oracle alternatives that ensures the longevity of the protocol and puts the security of our users’ assets at the forefront of the product offering. Within the DEXTF protocol, prices are moved by underlying asset values on the dApp or buy supply/demand market makers in liquidity pools. This enables the community to take advantage of arbitrage opportunities between dApp value and traded market value. With an influential community powered by multi-chain expansion, our utility is rapidly expanding, offering solutions for TradFi/DeFi, fund managers/investors. After two years of building a highly functional platform, centred on security, our marketing efforts will begin shortly. Once DEXTF gains exposure through its highly influential network, there really is no limit to how far this project can grow.