Oracles
What is an Oracle and why does eBTC need one?
An oracle is a service or mechanism that provides external data (such as the price of an asset) to smart contracts on the blockchain. Oracles are necessary because blockchain technology, by design, is unable to access data from the outside world, including real-world events and market prices.
Since eBTC aims to maintain its peg to the price of BTC, which is a native asset of the Bitcoin blockchain and traded across various platforms, the system needs to access accurate and consolidated price data of this asset in relation to its collateral (stETH) at all times. Some Oracle services have demonstrated their ability to securely and dependably report the value of these two assets to the Ethereum Blockchain.
What Oracles does eBTC use to get its price reference?
The eBTC protocol accommodates two oracles simultaneously: the Primary and the Secondary. Upon initiating an operation that requires the stETH/BTC price, the system first consults the Primary Oracle for its most recent report. Should the Primary Oracle fail to respond, or if it violates any security conditions—such as appearing frozen or exhibiting significant deviation from expected values within a short timeframe—the Secondary Oracle is activated as a contingency to maintain accurate pricing within the system. The protocol allows for the substitution of either oracle through a stringent and transparent procedure, details of which are elaborated in the Minimized Governance section. Further information on these oracles can be found in the subsequent section.
Primary Oracle
At launch, eBTC will integrate Chainlink as its primary Oracle Provider, an organization known for setting the industry standard for decentralized and secure price feed Oracles. The primary Oracle for eBTC is created by aggregating the following price feeds from ChainLink:
As noted, the system utilizes a dual price feed mechanism to ascertain BTC's value relative to ETH, not stETH. This methodology is informed by the evaluated risk of a major ETH/stETH depeg being minimal. For the sake of efficiency and to keep the maximum deviation threshold low, it is presupposed that ETH and stETH are equivalent on a 1:1 basis. Nonetheless, the framework is designed to accommodate the of a third price feed (stETH/ETH, 0.5%, 24hr) to accurately reflect the dynamics between the two assets if a significant depegging event were to be observed.
As a result from the aggregation, the eBTC Protocol manages to obtain a reliable access to the BTC/ETH pair price with a maximum possible price deviation at any given time of 1% (and 1.5% if collateral feed source is enacted or, in other words, if stETH/ETH is incorporated).
Secondary Oracle
At the moment of launch, no secondary oracle will be incorporated. A thorough assesment is being conducted to identify the most ideal candidate from a reliability, safety and decentralization perspective.
Last updated
