MakerDAO’s Oracles and Feeds bridge the Maker Protocol and world markets. Oracles are specific smart contracts within the Protocol; Feeds are actors that submit price data to the Oracles. That price data is then read by Keepers, who trigger liquidations to help Dai maintain its soft peg to the US Dollar. Each Feed queries a set of many different exchanges.
To increase the security of the Protocol as MakerDAO moves toward complete decentralization, Maker Governance recently reviewed and discussed Maker Improvement Proposals (MIPs) to add four “Light” Feeds to the existing Oracle group:
- MIP10c14-SP1: Appoint on-chain liquidity aggregator Kyber Network as Light Feed
- MIP10c14-SP2 Proposal: Appoint API access provider( to Ethereum and IPFS) Infura as Light Feed
- MIP10c14-SP3 Proposal: Appoint Ethereum block explorer Etherscan as Light Feed
- MIP10c14-SP4 Proposal: Appoint open-source Web3 development community Gitcoin as a Light Feed
A mid-June Governance Poll determined that the above proposals proceed to an Executive Vote, which was held on July 3. As a result of that vote, the MIPs were accepted by MKR holders.
These and other MIPs ensure that Maker Governance is working to meet the current and future needs of the Maker Protocol, and showcase how decentralized governance is thriving.
Why Are Oracles Important?
By design, blockchains are self-contained systems that are extremely effective at maintaining accurate distributed ledgers through decentralized consensus. They are also self-referential, meaning they are not designed to look beyond themselves for information. This raises an issue for projects that need to interact with real-world data, such as market prices, weather info, traffic conditions, etc., to operate efficiently and effectively. The Maker Protocol is one such project. It requires market price information to ensure all Dai in existence is adequately collateralized.
Oracle Feeds deliver the prices of collateral assets to the Protocol from the centralized exchanges on which the market prices are established. In simpler terms, Feeds pull the prices and record them to the blockchain as transactions. Some do so regularly (e.g., every few minutes); MakerDAO’s Oracles update prices on the blockchain every time they change by 0.5% or more.
Why Are Multiple Oracles Necessary?
To help ensure price accuracy and build trust in the Maker Protocol, multiple Feeds pull price data from many sources. If one Feed goes down due to a service outage, for example, or provides information wildly different from another (due to price fluctuations on a particular exchange or deliberate interference), there are many other feeds that work together to ensure an accurate picture. As of this writing, the MakerDAO Feed Dashboard shows prices for seven different collateral assets based on 24 Feeds.
In the Maker Protocol, a smart contract known as the Medianizer takes the median of all the price data fed to it. The more feeds used, the greater their credibility and the more trustworthy the Oracles. Simply put, with each new Feed, the Protocol becomes more decentralized, removing single points of failure and ensuring that robust and reliable data is delivered for the ecosystem’s smart contracts and Keepers to use.
About the “Light” Feed Providers
At the outset, MakerDAO Oracle Feeds were “Dark”—provided pseudonymously to protect the individuals running them from blackmail and extortion. But toward the end of 2019, Maker Governance began adding “Light” Feeds.
Light Feeds are provided by publicly-known entities, typically significant organizations in the Ethereum ecosystem. These organizations are better prepared than individuals to withstand coercion or hacking, and their reputations add credibility to the data they provide.
A number of major players in the crypto scene run Light Feeds in addition to the Maker Foundation, including dYdX, 0x, TokenSets (formerly Set Protocol), Gnosis, Kyber, Infura, Etherscan, and Gitcoin.
Etherscan has been a block explorer in the Ethereum ecosystem for the past five years. “Etherscan has worked closely with countless projects in providing support to display on-chain and off-chain data,” says Elvis Hee of Etherscan’s Product and Strategy team. “We believe our ethos of neutrality and impartiality will help in providing a reliable source of pricing data.”
On the Gitcoin platform, Dai is the second most used token (Sai is number three), according to Gitcoin Founder Kevin Owocki. “We have a rational economic incentive to keep the price data clean and good because it enables members of Gitcoin’s community to transact with one another,” he says. “I am pleased Gitcoin will run a Light Feed for Maker.”
Finally, Infura co-founder Michael Wuehler is happy about the steps Maker is taking. “We are excited by Maker’s process of decentralizing what has become a systemically critical piece of the Web3 ecosystem,” he says. “At Infura, we bring our strong infrastructure capabilities, experience, and reputation to further contribute to this decentralization."
Participate in Maker Governance to Empower Decentralization
The submission of MIPs, including those proposing new Oracle Feeds, allow community members to suggest changes and additions to the Maker system, and define key issues. They are critical to the evolution of Maker governance as the project carefully moves towards full decentralization.
If you’re an MKR holder, or plan to become one, learn more about participating in Maker governance by reading the Voter Onboarding Guide and the Governance and Risk Overview on Awesome MakerDAO, and join the public Governance and Risk Meetings on Thursdays at 16:00 UTC.