Crypto Luna and Terra Luna Ecosystem
In 2022, the future of Cosmos and its mission of inter-blockchain communication (IBC) looked uncertain. The collapse of the Terra Luna ecosystem (the largest protocol on Cosmos at the time), discord between co-founders, and a decrease in the token’s price all contributed to this. Despite this, projects such as dYdX and cross-chain oracle protocol Seda, formerly known as Flux, still supported the network and its IBC vision.
Presently, Seda claims to provide more than 12 million data feeds across 24 networks. Jasper de Gooijer and Peter Mitchell, co-founders of the Seda protocol, discussed the significance of oracles in cross-chain bridges and how they ensure the value they facilitate during an interview with Cointelegraph at EthCC Paris.
Cointelegraph: How do oracles add value to IBC?
Jasper de Gooijer: The current challenge is that smart contracts can only query data outside of blockchains, right? This significantly limits the number of use cases that smart contracts have, such as in lending markets. Therefore, in such markets, if you want knowledge on prices on, for example, six chains simultaneously, you need six oracle providers, and that is when you require multichain oracles.
Exploring Security in the Seda Ecosystem
CT: What is the biggest accomplishment or technological breakthrough thus far in the Seda ecosystem?
Peter Mitchell: We launched Seda about a year ago. And within eight weeks, we became the second-largest oracle, securing over $2.7 billion in total value locked. And then we realized that we couldn’t scale AI into something like 200 chains, right? It would be impossible to have robust monitoring of price feeds.
So the innovation we’ve built on Seda is that the main chain aggregates the data and then pushes the smart contracts to the subchain. And so, rather than deploying the oracle contract on every new chain, we just deploy this single crypto Luna Classic smart contract.
CT: In light of recent high-profile oracle exploits, what are some ways of keeping the technology secure?
The Need for Education and Smart Price Data Modules
JG stressed the importance of education, noting that people should not build a bridge with hundreds of millions of value locked if the associated token only has $10 million of liquidity on decentralized exchanges. Additionally, he suggested building smart price data modules to swap tokens with a time-weighted average price, reducing the chances of slipping in volatile environments.
PM added to this by pointing out that if a token is being borrowed against $100 million, with only $10 million in liquidity on-chain, it would be impossible to liquidate $100 million or $50 million positions. Consequently, it is necessary to set up metrics such as liquidation thresholds and collateralization ratios in order to ensure the success of the protocol.
This interview has been edited from its original format for clarity.
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