Uniswap founder Hayden Adams shared his opinion on the recent massive liquidation event on Compound, noting that his native TWAP oracles likely prevented a liquidation cascade.
Revealing that Uniswap’s oracles which report DAI prices did not surge in price, Adams claims that they made it possible for more extreme prices to be rejected.
On November 26, the price of DAI surged by 30% on Coinbase. Despite being a stablecoin, the cryptocurrency’s value massively increased for a short time.
Instead of circulating around $1, the token suddenly cost $1.3. As many lending and borrowing protocols offer stablecoin-based loans, the abnormal event severely impacted certain protocols.
The price surge hit Compound the hardest, as the protocol used only one price source for fetching DAI’s price. With one token now costing $1.3, users who had over-leveraged loans experienced near-instant liquidation. In fact, Compound reports a total of $103 million in liquidations.
Now, Hayden Adams reveals that Compound had the chance of having an even larger liquidation cascade if it was not for Uniswap. He explains that the DeFi protocol also uses Uniswap’s TWAP oracles for gathering price data.
However, these TWAP oracles did not report the same price that DAI had on Coinbase as they fetched data from different sources. Adams believes that if these oracles were not integrated into Compound, the event would have liquidated even more users.
Within the comments, famous Crypto Twitter persona ‘ChainLinkGod.eth’ accused Adams of advertising his oracle solution to DeFi developers. In a chain of comments, the anonymous user talked about the inefficiency of TWAPs, noting that developers should use Chainlink instead.
Would DeFi benefit more from Chainlink?
Indeed, the decentralized oracles created by Chainlink may be a better solution for DeFi. Founder and CEO Sergey Nazarov reminded the community yesterday about the importance of oracle flexibility.
In a Twitter post, Nazarov advised that protocols should avoid using single exchanges as sources for crypto prices. Regardless of their number, he believes that there are better solutions on the market.