Chainlink co-founder Sergei Nazarov believes that increasing the decentralization and scalability of Oracle technologies is key to building trust in the DeFi ecosystem.

Oracles play an important role in the proper functioning of DeFI protocols by linking them to real data.

However, Oracle’s reliability is diminished in situations where they rely on a single data source for information. For example, according to Nazarov, hyper-centralized “oracles” recently led to five fast lending attacks, resulting in the loss of DeFi protocols about $ 40 million.

Quick loans, a type of loan that does not require collateral, can be used to manipulate the price of an asset and steal money from the DeFi protocol.

“You don’t want to use just one exchange [as a source of price determination] and hope for the best, because if that exchange is limited in circulation or if someone gets a quick loan, (…) you will find yourself in a situation where someone controls the results in the DeFi protocol. Din “.

According to Nazarov, the only way to prevent such attacks is to make the protocol pricing mechanism dependent on multiple data sources. Therefore, Chainlink focuses on building Oracle’s decentralized networks.

“We receive data from many different data providers that connect us to hundreds of exchanges, and when the volume changes, Chainlink can correctly display the exact world price,” he said.

According to Nazarov, a properly functioning Oracle network should be able to scale in accordance with the size of the value fixed in the DeFi protocol.

Source: CoinTelegraph