Introducing Apollo: A MEV-Resistant Oracle
We are pleased to introduce one of the foundational products in development at Composable Labs: our oracle pallet, Apollo. This is an ideal method for us to kick off development on our parachain, Picasso, while delivering essential oracle functionalities and enabling more advanced secondary and tertiary DeFi functions later on. Ultimately, Apollo will join our suite of other parachain pallet offerings, and even other oracle pallets.
By offering an oracle pallet in our initial chain release, we intend to kickstart the DeFi ecosystem on Picasso.
The Importance of Oracles in DeFi’s Infrastructure:
Taking a broader view of the industry, oracles fit in as a core piece of infrastructure, referred to as DeFi primitives (or, primary infrastructure). DeFi primitives are “…the essential features of the underlying blockchain layer which have particular relevance to the security of DeFi protocols,” (Werner et al., 2021).
DApps then utilize secondary infrastructure to generate tertiary functionality and infrastructure, which provides more complex use cases. As an example, yield aggregators provide a means of profit maximization by moving user funds around to earn the highest yield. These require various different basic DeFi uses that generate yield (i.e. secondary infrastructure), making use of various tools to determine which secondary infrastructure to put which token type into at any given time.
The Vision for Apollo in the Picasso Ecosystem:
We thus see Apollo as the stepping stone to the creation of secondary and tertiary applications on Picasso that will rely on price feeds for functionality, which are currently under development by teams being incubated by Composable Labs.
However, we see Apollo as being one of many oracle solutions in the Polkadot ecosystem. As an example, Acala is currently building its Open Oracle Gateway to foster a more open, inclusive, and decentralized oracle infrastructure. The Gateway enables multiple oracles to be deployed on Acala, where they can serve any dApps on Acala, Polkadot, Kusama, and even other chains/networks. Hence, we believe Apollo will become one oracle of a well-developed oracle stack, and intend to work with partners that share this vision.
The oracle is built into the base of the Picasso parachain and heavily uses different blockchain hooks to medianize (i.e. calculate and bring towards the median) and update data. The goals of the oracle are to be flexible to use and to offer integrators differing levels of security.
To become an oracle data provider, one must just run a node and put down a stake of tokens. The stake is slashed if the oracle provider inputs data that is a calculable amount away from the median data value (such as price, in the case of a price oracle).
After an asset type is added to an oracle, it can be requested for a price. This will trigger a two-phase update. The first will be an http call using an offchain worker, which goes out to an application programming interface (API) managed by the node provider. This will fetch the price and add it to the chain with a signed transaction (tx). Then, on the next block, there is a check to see if a threshold of minimum providers have given an answer for the particular data.
If the minimum threshold has been met then at the top of the block, the chain will prune any stale prices (if the price is a certain number of blocks old), and if the threshold is still met, it will medianize the prices and reward or slash providers if they are within a specific threshold of the median.
After the prices are aggregated, the median price is then stored for that asset ID with a block number. Someone who is integrating with this pallet can determine their level of protection by using the block number.
For example, if a user is working with significant leverage, they can schedule all calls to require a future price with a blockchain hook like on_init (to be run at the top of a block). This will mean all users will get a future price that is not frontrunable. Further, where this would normally take 2 transactions, a user can do this with one transaction on Substrate.
Alternatively, if the price requires a less strict risk model, an application can opt to use the current price if the price is under a certain number of blocks old.
The Picasso Parachain Tech Stack:
Picasso provides developers access to a maintained parachain that they can build on, avoiding the arduous process of obtaining and maintaining their own parachain. We allow users to vote on pallets they want to add to Picasso’s run time. Thus, we decrease barriers to entry for parachain development, and provide all critical DeFi components as pallets, all within one place for community development.
We are eager to see what projects will come out of our parachain, and believe that Apollo is a key step to kicking off these innovations.
If you are a developer with a project you think fits our ecosystem and goals, and you would like to participate in our interactive testing landscape at Composable Labs, reach out to me on Telegram at @brainjar.