Vitalik Buterin: Uniswap’s UNI Should Become an Oracle Token

Ethereum co-founder Vitalik Buterin proposed that Uniswap’s native token should become the oracle token for the further development of the DeFi ecosystem.

In the Uniswap governance forum proposal, he noted that the functioning of several areas of DeFi depends on price oracles, including algorithmic stablecoins, synthetic assets and collateralized loans.

Oracles are data feeds that provide blockchain smart contracts with external information necessary for proper operation, such as asset prices or event outcomes. The best-known player in this market is Chainlink.

The project has a complex system with many features, and Uniswap has the potential to compete by offering a minimalist alternative, more focused on optimizing incentives and maximizing the cost of an attack, Buterin believes.

Chainlink’s incentives are not as transparent as, for example, those of Augur, due to the lack of an automated mechanism to punish participants providing incorrect data, he argues.

According to Buterin, UNI is in an ‘excellent position’ to become the token of a decentralized oracle, also because of its high market capitalization, which makes an attack very expensive. In late April the coin price surpassed $42. The asset traded around that level at the time of writing, with a total market capitalization approaching $22 billion (per CoinGecko).

The Chainlink LINK token hit an all-time high in early May above $50, with the coin’s market capitalization exceeding $20 billion.

The launch of oracles will not be an altruistic act for Uniswap, Buterin believes. The exchange will benefit from the existence of a more reliable stablecoin ecosystem and increased volumes of synthetic assets in the network, which will bring Uniswap growth in fee income, the Ethereum co-founder says.

On May 5 the launch of the third version of the Uniswap protocol occurred. ForkLog dissected the update and its implications for the DEX segment in a feature.

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