This New Tool Track’s Bitcoin’s Price Without Using An Exchange
The Bitcoin blockchain alone is now capable of tracking Bitcoin’s price without help from the outside world, thanks to a developer’s new tool.
As created by @SteveSimple on X (Twitter), UTXOracle is a Python program that “estimates the daily USD price of bitcoin using only your bitcoin Core full node,” according to the program’s script.
“It only reads blocks, analyzes output patterns, and estimates a daily average USD price of bitcoin,” the program states. The tool is fully open source, and can be used while disconnected from the internet by simply reading blocks from one’s device.
Price data for a given financial asset is typically sourced from centralized crypto and stock exchanges, where an active trading market creates liquidity to form a market and track current value. Naturally, however, such exchanges are centralized entities, subject to subjectivity, unreliability, and corruption that Bitcoin is supposed to escape.
This is especially true in the realm of crypto smart contracts, which require data price data and other external information to realize most of their use cases. By bringing price discovery purely on-chain, massive swaths of decentralized finance (DeFi) can become 100% “decentralized,” just like standard transactions.
The process for calculating price is a bit complicated: it involves using heatmaps of the Bitcoin blockchain to detect trendlines in the round BTC and USD denominations that users are transacting at, and assess price based on where those lines intersect.
Combined with just one day of external data to prime the model, UTXOracle can infer the daily price of Bitcoin with remarkable accuracy, within a 1% margin of error. On Monday, for example, it calculated Bitcoin’s on-chain price to be $26,448
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