The Bitcoin blockchain now has the capability to track the price of Bitcoin without relying on external sources, thanks to a new tool developed by a developer.
The tool, which is fully open source, reads blocks, analyzes output patterns, and estimates the daily average USD price of Bitcoin. It can be used offline by simply reading blocks from a device.
Typically, price data for financial assets is sourced from centralized crypto and stock exchanges, which are subject to subjectivity, unreliability, and corruption. However, Bitcoin aims to escape these issues.
In the realm of crypto smart contracts, price data and other external information are required for most use cases. By bringing price discovery purely on-chain, decentralized finance (DeFi) can become truly decentralized, similar to standard transactions.
The process for calculating the price is a bit complex. It involves using heatmaps of the Bitcoin blockchain to detect trendlines in the round BTC and USD denominations used in transactions, and then assessing the price based on where those lines intersect.
With just one day of external data to prime the model, UTXOracle can accurately infer the daily price of Bitcoin within a 1% margin of error. For example, on Monday, it calculated Bitcoin's on-chain price to be $26,448 USD, while Yahoo Finance calculated a "daily close" for Bitcoin at 26,183.21 based on CoinMarketCap data. New tool tracks Bitcoin price without exchange.
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New tool tracks Bitcoin price without exchange. Not Practical For Ethereum
The developer expressed admiration for Vitalik's work on Ethereum but pointed out that running Ethereum nodes on a local computer is impractical, which defeats the purpose of the project. The UTXOracle code requires the full blockchain to be on a local machine, and the success of cryptocurrency depends on independent copies of the blockchain on local machines. While many Ethereum users run their own nodes, they often use centralized cloud computing companies like AWS or run pruned nodes that don't contain full copies of the blockchain. The developer encourages people to run their own nodes to fully experience the potential of this new era of humanity.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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