[RFC] Change the 1INCH price oracle to Chainlink

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  • Title: Change the 1INCH price oracle to Chainlink
  • Author(s): Jordan Reindl (RoundElephant)
  • Submission Date: 26.08.2022

Change 1INCH pricing Oracle to Chainlink

Simple Summary

This proposal calls for changing the 1INCH price oracle to Chainlink from the Uniswap v3 1INCH/WETH 0.3% fee pool.

Abstract

Currently, the 1INCH price oracle is the Uniswap v3 1INCH/WETH 0.3% fee pool – the majority of the liquidity in this pool is concentrated and the Oracle rating is only Medium. There is significant on-chain liquidity for 1INCH, but it is fractured across several different liquidity pools.

1INCH has been supported on Chainlink for nearly 2 years. This oracle has been used throughout DeFi without issue – most recently in the 1INCH Aave market.

Motivation

After discussions with @euler_mab, it seems that PoS Ethereum represents unique challenges with using TWAP Oracles. Switching to an oracle that is harder to manipulate will reduce the risk for participants in this market.

Because 1INCH has a robust Chainlink Oracle, there seems to be little reason in continuing to use the TWAP Oracle.

Specification & Implementation:

If passed, the 1INCH market’s price oracle should be updated to use the Chainlink 1INCH / USD oracle see here: 1INCH / USD | Chainlink.

This oracle alternative was made possible by the recently passed eIP 14 and the implementation is similar to that called for in eIP 16.

Voting:

  • Yes – the 1INCH market should have its oracle changed to use the Chainlink 1INCH / USD oracle.
  • No – the 1INCH market should keep using the Uniswap v3 1INCH/WETH 0.3% fee pool TAP oracle.
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In the interest of full transparency I want to say that I am a core contributor at 1inch and an active participant in the 1inch DAO.

I realize the 1INCH market is pretty small on Euler right now, but I think there is an opportunity to expand it by upgrading 1INCH a collateral tier – I view this as the first step towards doing that.

3

This seems pretty sensible. I think 1inch could be switched to Chainlink as part of a broader move of asset oracles ahead of the merge i.e. in line with this proposal.

As for 1inch as collateral, I’d need to see more of a justification. During recent market turbulence liquidity on a lot of tokens dried up a lot, making it harder to justify their use as collateral.

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