Why Any DeFi Protocol 'Lives and Dies by Its Oracle' and How to Strengthen Them

**Niklas Kunkel** (0:00)
Sure. I mean, people didn't know what they were buying, right? They were buying an SPV on an SPV on an SPV, right? They had like second degree, third degree exposure.

**Steven Ehrlich** (0:12)
Hi, everyone. Welcome to another episode of Bits and Bips, The Interview. I'm your host, Steve Ehrlich, head of research at SharpLink, and we've got a terrific episode for you today.
But as always, before we dive in, just a little bit of housekeeping. One, nothing that you hear or see on this episode should be considered investment or financial advice. Please see unchainedcrypto.com/bits and bips for full disclosures. And second, before we dive in, let's hear from one of our sponsors.

**SPEAKER_3** (0:41)
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**Steven Ehrlich** (1:03)
All right, welcome back. So I'm here today with Niklas Kunkel. He is the founder of Chronicle Labs, an Oracle provider supporting the entire DeFi space with a heavy focus on tokenized assets.
And we're gonna talk about sort of the landscape of DeFi where the growth of tokenized assets and how they're being integrated into the plumbing of the entire financial ecosystem. And really kind of one thing I really want to get into is how we can sort of understand the differences between various Oracle providers given how critical they are to this space and explore how the industry has sort of dealt with certain challenges over the years as well. So lots of talk about Niklas. Welcome. Thanks for joining.

**Niklas Kunkel** (1:48)
Thank you for having me. Huge fan of the show and I watch almost every episode.
So great to finally be on here.

**Steven Ehrlich** (1:55)
Okay. That's nice to hear. Nice to say. I keep trying to get my kids to watch and they are not interested at all.
So let's really kind of get started because Chronicle and yourself, it has a pretty interesting background. I mean, you've been in crypto for at least a decade at this point. And it's kind of started with MakerDAO, the Dye Stablecoin, Psy, I think now it's called USDS, etc.
It's a really fascinating project because it in many ways created the entire DeFi space. And what I find most impressive is that it's really never, it hasn't gone down. I mean, just like Ethereum itself, like it's operated through bear and bull markets alike. And it's one of the real success stories. And that's sort of the origin story for yourself and what you're building at Chronicle Labs. So maybe just for anyone in my audience who's not familiar with your background, could you just please walk us through what those early days were like and sort of how it spawned the idea for Chronicle?

**Niklas Kunkel** (3:01)
Absolutely. Yep. So, you know, my background, right? I was part of the founding team of MakerDAO. And, you know, I think looking back, it seems kind of like manifest destiny. But like at the time, you know, there wasn't really any DeFi, you know, the only stable coin was Tether.
And there wasn't like a ecosystem of, say, DEXs and lending protocols, right? You know, so I think it was quite forward-looking at the time to say, oh, there's going to be this DeFi. And at the center of DeFi, there will be the stable coins. And we don't want centralized stable coins or we want a decentralized stable coin, right? I think, like, in hindsight, it all looks very obvious. But at the time, like, it was very, like, out there and, like, experimental.
And so even, like, Ethereum as a chain, like, right? Maker was originally built on Ethereum.
It had only been live for maybe, like, less than a year. There weren't really any apps on it, right? At least nothing, nothing serious. So we really had to build everything from scratch, right? And this is really kind of where, like, you know, my journey started with respect to oracles is that, you know, one day we were building a debugger because there was no solidity debugger, right? One day we're building a dex because it was actually the first dex on Ethereum. And it was because Maker didn't have any funding. We're like, how do we get funding? Well, if we build this, like, thing called a dex, like, we could sell some tokens and we can get some funding and maybe we can pay salaries this month, right? Like, it was very much DIY, build everything on your own, right? And that included, like, oracles, right? So this notion of an oracle didn't really exist, but we knew we needed a way to, like, externally price something in a kind of trustless manner. And that really kind of was the, I guess, like, what set everything off for me.