The Bitcoin Blockchain Can Now Track Bitcoin’s Price On Its Own
A developer has created a new tool that allows the Bitcoin blockchain to track the price of Bitcoin without relying on external sources. The tool, called UTXOracle, is a Python program developed by @SteveSimple on X (Twitter). It estimates the daily USD price of Bitcoin using only a Bitcoin Core full node. UTXOracle reads blocks, analyzes output patterns, and calculates the average daily USD price of Bitcoin. It is an open-source tool that can be used offline by reading blocks from your device.
Decentralizing Price Discovery
Typically, price data for financial assets is sourced from centralized exchanges, which are susceptible to subjectivity, unreliability, and corruption. However, UTXOracle brings price discovery purely on-chain, making decentralized finance (DeFi) more truly decentralized. This is particularly important for smart contracts in DeFi, as they require accurate price data and external information to function effectively.
The Calculation Process
The process for calculating the price involves using heatmaps of the Bitcoin blockchain to detect trendlines in BTC and USD denominations used in transactions. The tool assesses the price based on where these lines intersect. With just one day of external data to initialize the model, UTXOracle can infer the daily price of Bitcoin with remarkable accuracy, within a 1% margin of error.
Not Practical for Ethereum
The developer mentioned that a similar program wouldn’t be practical for Ethereum. Running Ethereum nodes on local computers is not feasible for most users, as they often rely on centralized cloud computing services or use pruned nodes that don’t contain full copies of the blockchain.
Hot Take: The Future of On-Chain Price Tracking
UTXOracle’s ability to track Bitcoin’s price solely on-chain brings us closer to a fully decentralized financial system. By eliminating the need for external sources, DeFi applications can become truly decentralized and independent. This tool has the potential to revolutionize how we determine asset prices and opens up new possibilities for smart contracts in DeFi. As more developers explore on-chain solutions like UTXOracle, the future of finance is becoming more transparent, secure, and autonomous.
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