New MakerDAO Oracle System, For-Profit DAO, Private DeFi

Good morning defiers! This is what’s going on in decentralized finance:

• MakerDAO’s new oracle system
• OpenLaw plans to launch for-profit DAO
• Chainlink creates tool to make blockchain transactions private

DeFi’s Largest Project is Changing How it Calculates Prices

MakerDAO is upgrading its oracles to have a faster, more decentralized system.

The new oracle system will move price calculations off chain, so that it’s less affected by congestion in the network, Mariano Conti, head of oracles at MakerDAO, said in an interview Friday. This should make price feeds faster and cheaper, which will be especially important once Maker upgrades to accept many kinds of collateral. Currently, the 14 price feed providers are anonymous, but in the new system, new providers will join and be made public to increase trust.

MKR holders will also vote on whether an oracle team can be chosen as a delegated party to facilitate the oracles’ administration and technical development. Incentives for feed providers will also change. Currently, compensation is funded by the Maker Development Fund. In the future, payment is expected to be sourced from the stability fees generated by the Maker Protocol, the statement said.

Oracles are decentralized applications’ weak point. For Dapps to work, they need information from the “real world,” like market prices, and so far, it’s been hard to get them without relying on centralized parties. That’s bad because they can be a central point of failure in a system that’s otherwise decentralized.

What Maker does with its oracles matters not just because it’s how it gets its prices to calculate thongs like ETH collateral value, but many other DeFi projects use Maker’s oracle system too.

** I posted part of the interview with Mariano yesterday and will publish the full version tomorrow.

OpenLaw Plans to Launch a For-Profit DAO

After four years avoiding a structure that looked too much like The DAO, which was a decentralized venture fund that got exploited, caused Ethereum to split, and prompted the SEC to say some tokens can be securities (and that DAO tokens were, in fact, securities), OpenLaw is launching The LAO, a limited liability for-profit DAO.

DAOs have been popping this year, but so far, they have been not-for profit entities meant to distribute funds for Ethereum projects. OpenLaw’s project would be the first for-profit one. The difference with The DAO is that this time, the team making this autonomous organization is moving a bit more slowly so as not to break things. While The DAO wanted to live in a legal grey area, where participants had assumed the organization’s decentralization would serve as a regulatory shield, OpenLaw wants to bridge smart contracts with real-world legal agreements.

The LAO will be set up as a limited liability, Delaware-based entity, and use smart contracts to handle voting, funding, and allocation of collected funds. The goal is that members will be able to invest in blockchain projects in exchange for tokenized stock or utility tokens, and not just be limited to making donations, like in many of the existing DAOs. The downside is that in order to comply with U.S. regulations, members will have to be accredited investors.

Still, it’s a big step forward to improve funding mechanisms in the blockchain space as charity donations can only go so far.

Chainlink Says it Can Make DeFi Private

Chainlink, which provides price feeds for blockchain applications, created a tool to preserve privacy in cryptocurrency transactions.

Smart contracts can make finance more efficient, but it also makes it more transparent, and that’s a problem for most big players as sensitive information, like transaction terms, amount and counterparties get published for everyone to see. Chainlink wants to help fix this and bring the $200 trillion in traditional capital markets, with an instrument it calls Mixicles, which are meant to provide privacy for both the terms and outcomes of the financial instruments they execute.

Mixicles are structurally simple, which means they have low on-chain and off-chain resource consumption, and they can support “rigorous regulatory and auditing requirements,” another must for institutions to start using smart contracts.

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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.

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