Indexing Chainlink's Price Oracles
Chainlink is one of the most ambitious projects in web3, providing everything from price oracles to external API adapters. With the ability for anyone to easily connect to any off-chain API and use it as an input or output for smart contracts on the blockchain, Chainlink has become a go-to for many in the crypto industry.
At the Indexing Company, we love Chainlink and indexing, so we decided to index their price oracles and run them through our transformation engine.
First, let's cover the basics. What are Chainlink’s price oracles, and why are they important for the crypto industry?
In the simplest terms, a price oracle is a source that provides up-to-date, real-time pricing data to software running smart contracts on a blockchain network. It can be compared to stock exchange tickers of the past that supplied real-time pricing data to people. Without accurate and reliable sources for crypto prices, smart contract software would not be able to execute correctly.
Chainlink's price oracles offer a reliable alternative to traditional methods of data collection and market assessment. The decentralized, secure protocol provides access to a range of leading sources that can be used to make informed price predictions. Prices are managed via an open-source aggregation algorithm, which minimizes the risk of falsified or inaccurate results. This is extremely beneficial compared to other price oracle solutions on the market, as it ultimately reduces the need for manual response checks and lowers financial exposure in potential errors. Chainlink's security measures also maintain top-level protection against external threats such as hacking and performance issues, giving users confidence in their pricing decisions.
So, why index Chainlink's price oracles?
By indexing Chainlink's price oracles, we can configure the Indexing Company's transformation engine to generate some interesting data points.
First, we indexed the feeds and merged labels (e.g. ETH/USD) to compare and contrast price data. Next, we ran different transformations to get things like spot, 1-day, 7-day, 15-day, and 30-day moving averages. Lastly, to visualize the above data points, we exposed an API via GraphQL and routed it into ReTool.
You might ask yourself, "I can already get this data on Coinbase. What's the big deal?"
The difference is in how the data is obtained and disseminated. Exchanges like Coinbase get crypto prices by matching buyers and sellers on their platform, and the prices on the exchange reflect the supply and demand of the crypto assets being traded on that particular platform. The prices of crypto assets on different exchanges can vary due to differences in trading volume, order book depth, and other factors.
Chainlink price oracles, on the other hand, obtain crypto prices from multiple, decentralized data sources, such as other decentralized exchanges (DEXs), off-chain data aggregators, and oracles. The Chainlink network is decentralized, meaning that it is not controlled by any single entity, making it resistant to manipulation and tampering. The Chainlink network uses a consensus mechanism to ensure that the data provided by the oracles is accurate, and it uses smart contracts to ensure that the data is tamper-proof.
If the goal of web3 is decentralization, using tools like Chainlink’s price oracles is pivotal.
We’re finishing documentation this week then we’ll make the API publicly available (for free!)
The above exercise, in addition to whatsmynameagain.xyz and mirrormirror.page, are examples of what can be created with The Indexing Company’s technology. Our mission is to provide the infrastructure so you can become the data company or surface to your end users.
Email us today at hello@indexing.co, and we’ll get you set up with your own configurable indexers and transformations to create fun tools like this.