Chainlink: Oracles for Hedging Swaps

Chainlink Oracles for Hedging Swap

As blockchain technology permeates various industries and weaves a more interconnected world, MetalSwap is committed to harnessing its potential.
One way MetalSwap bolstered its technological capabilities is by integrating Chainlink. In this article, we aim to delve into what Chainlink is, why decentralized oracles are crucial, and provide a brief overview about how Chainlink is involved in MetalSwap’s dApp.

In the dynamic world of decentralized finance, MetalSwap has emerged as a game-changer, proving its versatility through robust use-cases that seamlessly integrate with other protocols. From offering a comprehensive DeFi platform to presenting innovative solutions, MetalSwap has displayed an impressive capacity to foster connections and synergies across the blockchain ecosystem with different use-cases.

Today, we delve deeper into MetalSwap's technological gears, specifically exploring its integration with one of the most significant pillars in the blockchain world - Chainlink. In this intricate dance of protocols, MetalSwap dApp's synchronization with Chainlink's advanced technology not only augments its functionality but also amplifies the value it brings to the table, setting a compelling precedent in the blockchain and DeFi space. Let's embark on this technological voyage to unveil the sophisticated interplay between MetalSwap and Chainlink.

What is Chainlink?

Chainlink has established itself as a linchpin in Web3 services, enabling trillions in transaction volume across DeFi, insurance, gaming, NFTs, and other sectors. As the leading decentralized oracle network, it offers seamless access to real-world data and off-chain computation across any blockchain. It serves as a universal gateway for global enterprises to all blockchains.

Importance of Decentralized Oracles

At their core, blockchains mitigate counterparty risk by providing a decentralized, tamperproof, and unbiased system for settling transactions. They cannot access real-world data external to them, which severely limits the types of smart contracts developers can create. Here is where oracles come into play. Oracles input external data into the blockchain. However, a centralized oracle introduces a single point of failure, thereby re-introducing counterparty risk.

The Chainlink decentralized oracle network allows smart contracts to automate data transfer between blockchains and external systems securely and reliably. It operates on a decentralized network of independent entities (oracles) that collectively retrieve data from multiple sources, aggregate it, and deliver a validated, single data point to the smart contract, thus removing any centralized point of failure.

Fetching WBTC/USDT Prices on the Ethereum Mainchain with Chainlink

MetalSwap's commitment to providing accurate and reliable data extends to fetching the WBTC/USDT price, which is possible thanks to Chainlink's robust price feeds. According to Chainlink's data, the following values are provided: BTC/USD, WBTC/BTC, and USDT/USD. How does MetalSwap use these data points to fetch the WBTC price against USDT? Let's break it down.

The first step involves placing these values in a formula:

Let's simplify this equation: we start by multiplying the value of BTC/USD by WBTC/BTC, which gives us the WBTC value in USD. But our goal is to get the price of WBTC in terms of USDT, so we have to adjust this value by the USDT/USD rate.

By applying the rules of algebra, we can cancel out similar terms. The BTC in the numerator and the BTC in the denominator cancel each other out. The same happens with USD. The equation simplifies to:

And there we have it.
Through Chainlink's reliable and decentralized oracle network, we can accurately fetch the WBTC/USDT price, enabling us to maintain our commitment to providing reliable data and enhancing MetalSwap platform's capabilities. As blockchain ecosystems become more complex and interconnected, this accuracy and reliability will only grow in importance.

Through Chainlink, we are ensuring MetalSwap's systems aren't just automated, but are reliable and secure enough to withstand the complex and demanding nature of today's digital asset landscape.

WPAXG Token and Chainlink

In our network, WPAXG's value corresponds to PAXG.  How do we derive the PAXG/USDT value, thanks to Chainlink's oracle data feeds? It involves a process similar to the one we discussed earlier. Let's walk through the steps.

Our objective is to find PAXG/USDT. We start with the following formula:

What does this formula mean? The first part, PAXG/ETH, gives us the value of PAXG in terms of Ethereum. To convert this to USDT, we need to adjust this value by the ETH/USD rate, and then by the USDT/USD rate.

By replacing the '/' division operator with '*', we can simplify our equation:

Now, just as before, we can apply algebraic principles to simplify the equation. The ETH and USD terms in the numerator and the denominator cancel each other out, and we're left with

Spenza titolo
This equation gives us the value of PAXG (and by extension, WPAXG, because of the synthetizer feature) in terms of USDT. With Chainlink's decentralized oracle network, we can accurately fetch the WPAXG/USDT price. Again, this reinforces MetalSwap’s commitment to providing accurate and reliable data to the users, strengthening the robustness and reliability of the platform. As we continue to interlock and interact with other protocols, the need for precise, decentralized data will continue to rise, and Chainlink's oracle network will play a crucial role in fulfilling this requirement.
To get more information about WPAXG, visit the Official Docusaurus in the related page.

Preview of Chainlink Automation

Chainlink’s decentralized oracle network isn’t just about fetching data; it's about securing the future of automation. It offers the potential to automate numerous processes that currently require manual intervention, and its decentralized structure ensures that these automated systems run reliably and securely. 

MetalSwap’s Hedging Swap tool may take serious advantage from this kind of solutions: for Liquidation and Position Management processes, just to start.

MetalSwap’s contributors spoke about this topic in Naples during SpaghettiETH Event, and soon we’ll deep dive into it! ;)

What a time to be in DeFi!
Goodbye volatility!

To the MetalSwap
… and beyond!
-The DeFi Foundation


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✎ What is MetalSwap?

MetalSwap is a decentralized platform that allows Hedging Swaps on financial markets with the aim of providing a coverage to those who work with commodities and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.


With MetalSwap we enable Hedging Swap transactions through the use of Smart Contracts, AMM style.