Chainlink Wants to Become Crypto’s Benchmark Index Provider

Chainlink, the largest blockchain oracle provider, is betting on also becoming the leading index provider in the industry.

On Thursday, the Ethereum-based company unveiled its DeFi Yield Index (CDY Index), a new data product designed to provide real-time lending rate data from decentralized finance (DeFi) platforms. CDY is the first of what Chainlink plans will be many index products.

Chirag Dhull, Head of Developer Platform Growth at Chainlink Labs, told The Defiant that Chainlink is uniquely positioned to be this index provider “because it has long been the backbone of DeFi.”

“By launching the CDY Index, Chainlink continues to solidify its role as the standard for on-chain finance,” Dhull said, adding that Chainlink empowers institutions and DeFi projects with “decentralized, high-quality financial benchmarks they can trust."

In 2023, the index industry generated $5.8 billion in revenue, according to a report by international consulting firm Burton-Taylor. Index providers play a foundational role in the creation of investable products such as indexed funds and ETFs, in addition to facilitating market analysis.

Some of the leading crypto indices include the CoinDesk Market Index, CoinDesk 20 Index, the Nasdaq Crypto Index, and the Crypto-10 Index. Yet, not one has emerged as the one provider in the space whose indexes are most cited or used to create investment vehicles.

Chainlink’s Oracle Network

Oracles are essential to building a verifiable web, linking otherwise isolated blockchains to off-chain data and computation while enabling cross-chain interoperability. The Chainlink oracle network, specifically, helped to establish the DeFi ecosystem and to date, has facilitated over $9 trillion in transaction value, according to Chainlink.

Chainlink’s CDY Index will use blockchain indexing technology from data platform Space and Time to deliver real-time lending rate data from DeFi platforms. DeFi lending has surged to around $47 billion in total value locked (TVL) across numerous protocols, according to Chainlink.

Chainlink’s new product aims to improve transparency and make yield data more accessible in DeFi by offering real-time lending rates. It also underscores the need for more informed lending decisions, emphasizing the importance of accurate insights in the growing DeFi space.

“Chainlink has established itself as the standard for verifiable data across DeFi and the emerging on-chain finance ecosystem, and Space and Time provides a transformative database solution that unlocks advanced Web3 use cases,” said Scott Dykstra, co-founder of Space and Time.

DeFi Yield Index

DeFi protocols rely on precise asset pricing to determine debt and collateral values, directly influencing lending and borrowing decisions, Chainlink explained in its blog post. While traditional finance has established indexes reflecting broader economic trends, DeFi lacks similar aggregated data sources, the post highlighted.

To address this gap, the CDY DeFi Yield Index uses Chainlink's decentralized oracle network to aggregate lending yields, improving the visibility of on-chain yield opportunities across protocols.

“While there are similar real-time protocols and products out there such as APY.vision, and even reports put out by Bankless and DeFi analysts on different yield opportunities, Chainlink's CDY Index could become an industry standard,” said Davis Richardson, a Managing Partner at Paradox Public Relations.

Richardson also pointed out that Chainlink's CDY Index launch aligns with the rising interest in the iShares Ethereum ETF, which may eventually offer yield to TradFi investors by converting Ether’s staking rewards into dividends.

“Anyone who's been in the cryptosphere for a minute can see where this is heading: Investors want yield!” Richardson said. “And Chainlink is helping bring real-time data and information to these opportunities, cutting down on arbitrage discrepancies in the market.”