The Bitcoin blockchain can now monitor Bitcoin’s value independently, thanks to a new tool developed by a coder.
Introduced by @SteveSimple on X (Twitter), UTXOracle is a Python-based application that determines the daily USD value of bitcoin using only a bitcoin Core full node, as described in its coding script.
The software exclusively examines blocks, studies output trends, and computes an average daily USD value for bitcoin. As an open-source tool, it can function offline by just processing blocks stored on a user’s device.
Data related to the pricing of a particular financial asset usually comes from centralized crypto and stock exchanges. It’s on these platforms that active trading provides liquidity, shaping a market and determining present value. However, these centralized platforms come with inherent challenges such as bias, inconsistency, and potential corruption – issues Bitcoin aims to avoid.
This concern is heightened in the world of crypto smart contracts, which largely rely on price data and external information to function optimally. By shifting price discovery entirely to the blockchain, vast portions of decentralized finance (DeFi) can achieve full decentralization, mirroring traditional transactions.
The method to determine price is intricate. It employs heatmaps of the Bitcoin blockchain to identify patterns in the rounded BTC and USD values at which transactions are made. The price is then gauged based on the intersection points of these trends.
With just a single day’s worth of external data to set the initial parameters, UTXOracle can deduce Bitcoin’s daily price impressively, maintaining a margin of error within 1%. For instance, on a recent Monday, UTXOracle discerned Bitcoin’s on-chain price as $26,448 USD. In contrast, Yahoo Finance reported a “daily close” for Bitcoin at $26,183.21, using CoinMarketCap data.
Not Practical For Ethereum
In a communication with CryptoNews, the software’s creator, identified as @SteveSimple on X (Twitter), expressed that executing a similar program on Ethereum isn’t feasible. Even though he has immense regard for Vitalik’s contributions, he mentioned that Ethereum nodes are inherently unsuitable for local computer operations, which goes against the very essence of his initiative.
“To operate the UTXOracle software, you need the entire blockchain stored on a local device,” he elaborated. “This transformative phase of finance, ushered in by cryptocurrency, is largely contingent on individuals maintaining standalone, complete versions of the blockchain on their personal systems.”
Although numerous Ethereum enthusiasts manage their nodes, they frequently utilize centralized cloud platforms such as Amazon Web Services (AWS) for this purpose. Additionally, they might run “pruned nodes” – versions that lack a comprehensive blockchain record.
The developer emphasized, “I aim to inspire individuals to operate their own nodes, as this stands central to the promising new chapter we’re embarking upon in human history.”