After many in-depth discussions with other delegates and collecting community feedback, we have decided to move forward on implementing a hybrid exchange rate oracle for pricing LSTs that optimizes security and scalability.
We’re thrilled that the Chainlink Labs team has proposed an implementation for this oracle design, and we are actively seeking feedback from @Gauntlet.
The high-level overview of the proposed implementation is a Chainlink decentralized oracle network (DON) that would track the amount of underlying collateral backing an LST, which in this case is the amount of ETH actively staked on the beacon chain. For increased security assurances for the Compound protocol, the results from the DON could be combined with comparison check conditions against the LST issuer’s onchain calculated primary exchange rates and or secondary market rates. Note that this design is subject to change based on feedback from Compound service providers.
While the hybrid exchange rate oracle implementation is under development, @Gauntlet has suggested that we move forward and deploy wstETH as collateral on all three chains with exchange rate pricing for the time being. The objective would be to swap the pricing oracles after development and audits are complete, allowing for an acceleration in supporting wstETH to grow Compound’s TVL and revenue once enabled as collateral.
We’re excited to collaborate with Chainlink Labs and Gauntlet on implementing a new oracle to help Compound securely expand in the LST space. Stay tuned for more updates!