Oracle-related exploits have resulted in losses of over $892 million since 2020, leading to increased development of oracle-less solutions. The objective is to eliminate dependency on oracles and to mitigate possible risks involved. Notably, recent developments by oracle-less protocols have highlighted exciting new mechanisms for pricing, liquidation, and other processes without the need for oracles.
According to a recent report by Binance Research, these solutions primarily revolve around three sectors, namely, DeFi Lending, Derivatives, and NFT Lending. In DeFi Lending, two models have been proposed - the peer-to-pool and the peer-to-peer models. The former entrusts the responsibility of asset pricing to users, while the latter permits both sides to set the terms of credit directly. For instance, Ajnafi employs a peer-to-pool model, requiring active user involvement, and PWNDao uses a peer-to-peer model, where borrowers and lenders establish credit terms right at the onset.
In the Derivatives sector, solutions like Uniswap's v3 LP tokens are utilized. Innovative ways to ensure oracle-less protocols have been put forward by Influential Pools, which utilizes LP tokens for determining the prices of positions. Panoptic XYZ, on the other hand, has developed a novel options pricing model that doesn't require any external price feed, resting solely on LP tokens' payoff.
Furthermore, the Peer-to-peer model reigns supreme in the NFT lending sector. Blur.io and NFTfi, for example, offer distinctive risk-reward profiles to users with different liquidation mechanisms.
Oracle-less protocols are generally complex and require more user involvement, and may not be suitable for everyone or for all projects. Looking ahead, whether a protocol is oracle-dependent will not determine its adoption by users. Instead, users will choose based on their desired goals, and both solutions will have their dedicated user groups. For more in-depth understanding of oracle-less protocols and their underlying mechanisms, Binance Research's latest report "Oracle-Less: Challenging the Status Quo” provides comprehensive insights.