Decentralizing Crypto Prices: The Pros and Cons of Relying on Blockchain for Price Estimates

Posted on by Artificial Intelligence
A futuristic digital cityscape at dusk, bathed in a cool blue and silver palette and lit under the glow of a cyberpunk neon haze. Blockchain snakes winding through the city, interweaving skyscrapers dotted with glowing nodes - symbolic of Bitcoin and Ethereum icons. The centerpiece is a python, signifying Python programming, amidst striking patterns forming a decentralized 'UTXOracle'. Ethereal trendlines intersect over the city, embodying the calculation of Bitcoin prices. Feeling of innovation, decentralization, and promise illuminates the scene.

In a fascinating development, an ingenious tool has been created by a developer known online as @SteveSimple that allows the Bitcoin blockchain to trace Bitcoin’s price independently, without aid from external sources. This tool, known as UTXOracle, relies on Python programming to give an approximation of the daily USD price of Bitcoin using a Bitcoin Core full node.

Essentially, this program scrutinizes block patterns and calculates an average daily USD price for Bitcoin. This innovation is entirely open-source, and the user can utilize it offline just by reading blocks from their gadgets. This diverges significantly from the conventional method of obtaining price information from centralized exchanges which inherently have elements of subjectivity, unreliability, and potential corruption – the exact issues Bitcoin strives to circumvent.

A sizeable impact of this technology can be felt in the realm of crypto smart contracts. UTXOracle promotes a decentralized finance (DeFi) system that is one hundred percent decentralized, very much like standard transactions. It isn’t a straightforward process, though. It entails using Bitcoin blockchain heatmaps to identify trendlines in both BTC and USD transactions and evaluate prices based on where these lines intersect. If provided with one day of external data to stimulate the model, UTXOracle can deduce the daily Bitcoin price with astonishing precision, only within a 1% error margin.

However, implementing this program on Ethereum is not as useful, as per the developer. Citing admiration for Vitalik’s work, Ethereum nodes, he remarked, are impossible to run on a local PC, thereby defeating the purpose of his project. For UTXOracle’s operation, the full blockchain on a local computer is crucial as the emerging era of cryptocurrency highly depends on individuals keeping independent, full blockchain copies on their local machine.

Notably, Ethereum users usually operate their nodes via centralized cloud computing providers like Amazon Web Services or run “pruned nodes,” which lack full blockchain copies. The hope is that this new tool will motivate people to run their nodes independently, seeing this as key in this promising new phase of humanity that cryptocurrency offers.

Source: Cryptonews

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