SupraOracles CEO: Only by solving the oracle dilemma can DeFi have a brighter future
TechFlow Selected TechFlow Selected
SupraOracles CEO: Only by solving the oracle dilemma can DeFi have a brighter future
Before DeFi can access these massive funding pools, it must first address major challenges—namely vulnerabilities in smart contracts and oracles, which have already caused over $1.4 billion in stolen funds from decentralized financial activities.
Navigating Web3 tides with focused insights
By Joshua Tobkin, CEO and co-founder of SupraOracles
Translation: TechFlow
Decentralized finance (DeFi) is the fastest-growing segment of the crypto market. DeFi promises to build a consumer-centric, open-source, permissionless, and transparent financial system that reshapes the trajectory of both consumer and institutional finance.
Lending, borrowing, insurance, and direct exchanges represent only a fraction of the use cases disrupted by this new financial paradigm—one that eliminates costly intermediaries and delivers greater value to end users.
Don’t just take our word for it. In just one year, DeFi’s total value locked (TVL) surged from approximately $25 billion to nearly $100 billion.
Having attracted significant retail adoption, DeFi’s next frontier is institutional adoption. Institutions are moving. Early successes have fueled their appetite to deploy substantial capital into these emerging financial applications. However, before DeFi can access these vast pools of capital, it must overcome major challenges—specifically, vulnerabilities in smart contracts and oracles—which have already resulted in over $1.4 billion in stolen funds from decentralized financial activities.
The Oracle Dilemma (and Its Cost)
Despite their strength, blockchain networks today operate largely as closed systems. Data flows seamlessly within blockchains, but connecting them to the outside world remains challenging—and presents enormous opportunities.
Oracles solve this challenge. Simply put, they connect blockchain networks with “real-world” data, enabling on-chain applications to respond to external information. Examples include cryptocurrency prices, fiat currency rates, traditional financial data, sports results, and weather conditions.
Oracles stand at the threshold of unlocking powerful decentralized financial applications and services that leverage real-world data.
However, they are not without flaws. Collusion can allow a small group of participants to alter incoming data; network latency can delay data availability; and lack of consensus on input data can lead to cascading failures when faulty data enters deterministic and composable smart contracts.
- In June 2019, Synthetix’s oracle incorrectly reported the Korean won price as 1,000 times higher than the actual value of its sKRW token (synthetic Korean won), resulting in a temporary loss of $1 billion (later recovered). An attacker exploited a sophisticated trading bot to profit from the mispricing of sKRW, executing thousands of trades—each yielding a few thousand dollars—amounting to nearly $1 billion in illicit gains within an hour.
- In November 2020, Cheese Bank, an Ethereum-based decentralized digital bank, lost $3.3 million due to an oracle attack. The ability to instantly borrow, swap, deposit, and reborrow large volumes of tokens allowed attackers to manipulate the price of a specific token on a single exchange. This created an arbitrage opportunity between the previously borrowed amount and the newly manipulated oracle repayment price, draining $3.3 million from the project’s lending pool.
- That same month, nearly $90 million in loans were liquidated across lending protocols. A malicious actor appeared to manipulate the price of a token on Coinbase Pro—an exchange whose pricing data was used by the Compound protocol to set its own rates. As the token served as collateral, the oracle manipulation caused Compound’s smart contract to falsely believe many loans backed by this token had breached their collateralization thresholds. Consequently, the protocol erroneously liquidated over $89 million worth of user loans. Even the third-largest user of the protocol suffered a $46 million liquidation. Technically speaking, Coinbase Pro’s cryptographic signature only proved access to their private keys—not the accuracy of the data provided—highlighting the urgent need to eliminate single points of failure in oracle design.
As the DeFi ecosystem grows more complex and interconnected, oracle-related risks will only increase.
Therefore, proceeding without a viable alternative solution would be dangerously reckless.
Current oracle solutions are dominated by those struggling to balance decentralization, speed, and security. Some leading players mistakenly prioritize speed at the expense of decentralization and security. Such designs pave the way for further performance failures, security breaches, and exploits—hindering widespread institutional adoption of decentralized technologies on open networks.
Beyond the core demands of decentralization, security, and speed, interoperability is becoming increasingly critical. Across Web3, there is growing demand for a multi-chain future—a constellation of decentralized networks integrated into a seamless technological fabric for all users and institutions. Any oracle solution aiming to play a role—or replace traditional tech stacks—must be built for this interoperable future.
These challenges present a pivotal opportunity to address the oracle dilemma. By solving them, we can significantly enhance DeFi’s security—enabling this emerging industry to tap into massive pools of traditional financial capital and sustain the exponential growth of this new, permissionless, open financial paradigm. Ultimately, if we fail to secure the oracle layer, we are unfit to steward the future of finance. We must do better.
Joshua Tobkin is the CEO and co-founder of SupraOracles, a blockchain organization dedicated to bridging the gap between traditional capital markets and the Web3.0 ecosystem. He is the designer of the Supra BFT consensus algorithm and a visionary blockchain architect and developer. Prior to joining SupraOracles, Josh spent over a decade building SaaS companies, and now aims to leverage his experience to provide the developer community with a new suite of oracle tools that simplify the creation, deployment, and management of data-driven applications with exceptional performance, robustness, and agility.
TechFlow is a deep-content platform focused on alternative asset investment. Follow our official account for more insights, or add WeChat TechFlow01 to join the TechFlow community and participate in discussions.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@SupraOracles
