Avalanche-based algorithmic money market protocol BENQI is integrating Chainlink Price Feeds to ensure protocol security against the infamous flash loan attacks.
BENQI Integrates Chainlink Oracles
Today, Avalanche’s C-Chain-based algorithmic money-making protocol BENQI announced it is integrating Chainlink Price Feeds to safeguard the protocol against flash loan assaults.
Fundamentally, using secure and reliable oracles play a significant role in developing secure lending protocols that are dependent on external price sources to ascertain collateralization rates and liquidation conditions.
However, dependence on single-source oracles runs the risk of exposing such protocols to manipulation and exploits relying on flash loans which is essentially an instant and unlimited loan. An attacker can target a large pool of funds to instantly change the price of a key asset (eg, USDT) and execute operations that would drain funds from the protocol due to a false assumption.
Several prominent DeFi protocols such as Compound, Warp Finance, and others have suffered costly flash loan attacks in the past. For instance, Compound’s oracle believed that DAI was worth $1.4 during a flash crash in November 2020, because DAI briefly traded at this price on both Coinbase and Uniswap, the two exchanges used by Compound’s oracle. This resulted in more than $50 million in unfair liquidations.
However, by leveraging Chainlink’s Price Feeds, BENQI will be able to fend off any potential price manipulation – both natural or artificial. The first few price feeds to be consumed include AVAX/USD, LINK/USD, ETH/USD, wBTC/USD, USDT/USD and DAI/USD, with more expected to be added later on thanks to Chainlink’s flexible framework.
About Chainlink Price Feeds
For the uninitiated, Chainlink’s Price Feeds are aggregated from hundreds of sources and reviewed by Chainlink Nodes which ensure the average reading is not impacted by significant outliers. The fact that Chainlink Price Feeds source data on all available liquidity in the cryptocurrency ecosystem would make it near impossible or at least prohibitively expensive for anyone to conduct a market manipulation attack on the BENQI protocol.
“Price oracles are one of the most often overlooked yet extremely important elements within decentralized protocols,” said Hannu Kuusi, Co-Founder BENQI. “After internal research and discussions, we decided to go with the industry standard oracle network, which is already securing billions of dollars within decentralized financial applications alone. Having Chainlink secure our price feeds, we have an added confidence in the security and health of our protocol.”
BENQI’s integration with Chainlink sits in line with its vision of building open and regulatory compliant dApps on Avalanche and future Avalanche subnets. Moreover, the rapid growth of the Chainlink Network and its very liquid presence in the wider crypto markets and smart contract economy means LINK will be one of the first few pools open at the launch of the BENQI protocol.
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