The year 2022 proved to be a challenging one for Cosmos and its vision of inter-blockchain communications (IBC). Multiple setbacks, including the collapse of the Terra Luna ecosystem, internal tensions among co-founders, and a decline in token price, have cast doubt on the future prospects of the network. However, despite these challenges, projects such as dYdX and Seda (formerly known as Flux) continue to embrace Cosmos and remain committed to its IBC vision. In this interview with Cointelegraph at EthCC Paris, Jasper de Gooijer and Peter Mitchell, co-founders of the Seda protocol, shed light on the significance of oracles in cross-chain bridges and how they safeguard the value they enable.
Jasper de Gooijer emphasizes the current limitation of smart contracts, which can only access data external to the blockchain itself. This limitation severely restricts the potential use cases of smart contracts, particularly in lending markets. To obtain knowledge about the price across multiple chains simultaneously, multiple oracle providers are required. This necessity for multichain oracles highlights the critical role played by oracles in enabling IBC to function efficiently.
Innovation in the Seda Ecosystem
Peter Mitchell recalls the success of Seda in becoming the second-largest oracle within just eight weeks of its launch, locking in over $2.7 billion in total value. However, the challenge of monitoring and scaling this service for hundreds of chains became apparent. To address this issue, Seda introduced a groundbreaking innovation. Instead of deploying the oracle contract on every new chain, they implemented a system where the main chain aggregates the data and pushes the smart contracts to the subchain. This streamlined approach eliminates the need for deploying the oracle contract repeatedly and ensures a more efficient and scalable operation.
Given the recent high-profile oracle exploits, maintaining the security of the technology is of utmost importance. Jasper de Gooijer highlights the significance of education in this regard. It is crucial for users to understand that bridges should not be built with substantial amounts of value if the liquidity of the underlying token on decentralized exchanges is significantly low. Additionally, implementing smart price data modules that enable the swapping of tokens based on time-weighted average prices can mitigate risks in volatile environments.
Peter Mitchell emphasizes the importance of setting up appropriate metrics, such as liquidation thresholds and collateralization ratios, prior to engaging in transactions. These measures help to safeguard the protocol against potential vulnerabilities and ensure its overall stability.
Despite the challenges faced by Cosmos in 2022, projects like Seda continue to uphold the vision of inter-blockchain communication. The interview with Jasper de Gooijer and Peter Mitchell sheds light on the importance of oracles in bridging different blockchains and the innovative solutions implemented to enhance the efficiency and scalability of the Seda ecosystem. As the blockchain industry evolves, the development and adoption of robust security measures will be crucial in ensuring the trust and confidence of users in these transformative technologies.