Neutron NTRN: Slinky Integration

🛰️SLINKY IS COMING TO MARS

Mars Protocol, an integrated app on Neutron ✴️, will soon be adopting Skip Protocol (🥧, 📈) Slinky oracle, so let's talk about some of the problems with current oracle solutions and how Slinky can improve upon them.

Stale oracle prices and expensive oracle price updates

Currently pull based oracles are widely adopted in DeFi. A pull based oracle means you are retrieving an off-chain oracle price that has been signed by a trusted price publisher and pushing that price on-chain to a smart contract that verifies the signature and if valid updates the price.

The pull based oracle was an improvement on the push based oracles that came before it because apps could now choose their own frequency of oracle price updates. Apps could update price sources at the highest frequency they needed that was also economically viable and if the blockchain was congested and gas prices high they could still push through price updates by paying a premium to do so.

Reading the above statement you might already see some potential issues with the pull based oracle system. The issues are mainly around:

🔴 That when a chain becomes congested oracle prices may not get updated, causing stale oracle prices and/or
🔴 If gas prices are high, updating these oracle prices at a high frequency can become very expensive.

How does Slinky solve this problem?

Slinky taps into a new feature of CometBFT, the consensus engine behind Cosmos SDK called Vote Extensions. Vote extensions allow validators to include arbitrary data with their consensus votes which is a perfect fit for a validator set coming to consensus on oracle price sources.

With Slinky chains can now guarantee oracle price updates every block while at the same time removing dependencies on third party systems. The protocol does not need to worry about stale prices or expensive price updates now that the oracle has been enshrined into the blockchain itself.

Oracle Front Running

This enshrined oracle that can guarantee fresh price updates to every block is especially important for Mars Protocol who will shortly be launching oracle perps functionality within its credit account. Oracle perps have been a great innovation in DeFi solving cold start market problems and challenging order books as the consensus way to build a perps platform.

One issue that oracle perps platforms have battled with over the years however is oracle frontrunning. You can find evidence of this through a historic series of blog posts from Synthetix dating back to the beginnings of DeFi.

The widely adopted work around to oracle front running in DeFi today is to introduce delayed orders. The delay time is typically greater than an oracle staleness time which ensures that a malicious user cannot frontrun the oracle price.

What this means to the user is when you place an order, the order will not immediately execute, instead it will go in a queue where it has to wait for a minimum amount of time before becoming eligible to execute. A keeper bot network generally runs in the background to execute these orders once eligible to avoid the user having to sign two txs to fill an order.

Slinky mitigates the ability for a malicious user to front-run an oracle price by guaranteeing that a fresh price will be available before every block is processed. It is no longer possible for a malicious user to take advantage of any price staleness for profit.

Availability of other relevant pricing data

While having an up-to-date price is critical for a well functioning protocol there are additional measures a protocol can take to safeguard its users and protect against insolvencies.

Examples of this include:

🔴 Bridged asset Proof of Reserves
🔴 LST asset Proof of Redemption
🔴 Custom price metrics to use as circuit breakers such as EMA, price deviations

With Slinkys Sidecar, it’s very possible to have validators come to consensus on data that is outside of just pricing. This could allow a protocol to build out sophisticated oracle circuit breakers to avoid exploits or insolvencies.