The right data instantly, the real challenge of DeFi – The decentralized finance sector is here to settle for the long term. This bubbling ecosystem should grow significantly in the coming years, as use cases and adoption multiply. However, to establish itself as a credible alternative to the traditional financial system, it still has to meet many challenges. One of them lies in the immediate and precise accessibility of the data necessary for the functioning of the smart-contracts that populate the blockchains. In practice, this is not yet the case. A difficulty to which Pyth Network offers to provide solutions. Let’s get into the details.
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Between latency and data verification, the problems of Oracles
For our favorite DApps (Decentralized Applications) to work, they need data as diverse as it is varied: stock prices, cryptocurrency prices, daily weather or sports scores. Typically, le protocol Aave for example needs to know the price of an asset to execute a liquidation. However, internal blockchain smart-contracts are not able to retrieve this data. They therefore call on partners of choice. The Oracles, essential cogs of a well-oiled system, or almost…
For optimal operation, protocols need real-time information. A task that remains very difficult to accomplish. Indeed, the majority of oracles are coded in order to retrieve data from the net. For this, they go through a number of intermediaries like CoinGecko or Yahoo! Finance. A process that takes time and costs money. The oracles have no control over the format of the data and its update frequency.
There is also the question of the veracity of the data retrieved. This is often partial, even inaccurate. For example, the recovered value may be out of step with the actual price of an asset. In addition, the source from which the data is taken is not necessarily aware that it may be crucial for securing billions of dollars within DeFi. One thing is certain, to claim to compete with the traditional market, DeFi must be able to boast of using real-time data. It is for this task that Pyth Network has been developed.
Like the Pythia transmitting the message of the gods to the generals of the lower world, Pyth Network is an open-source and free oracle which creates a lien direct between data transmitters and the DApps that populate DeFi. The Pyth Network teams have managed to bring together major players in traditional finance and traders who usually do not work together and are even more often rivals.
We find the names of Jump Trading, DRW Cumberland, Jane Street, GTS… But also crypto exchanges like Binance, Huobi, Gate, Kucoin … These organizations own or directly create the data and are therefore able to provide it with precision at any time. An incomparable situation with the collection of data from websites …
On the other hand, the partner entities of Pyth Network are fully aware that their data is susceptible to secure billions of dollars and therefore check them accordingly. What reassure the developers compared to a source found on the net and potentially ignorant of the potential impact of the information it delivers.
Pyth Network thus compiles a data feed from more than 70 market makers, exchanges and trading organizations for DApps developers. In addition, Pyth Network assigns its data a confidence interval, that is, a margin of error associated with each value provided. Typically the BTC/USD pair at a time T can trade at $19405.19 ±$9.907 depending on the buy and sell orders placed in the order book. What more fully secure the information transmitted to developers.
Pyth Network, performance that meets the challenges
Pyth Network deployed its mainnet on the Solana blockchain in August 2021, providing information of all types: stocks, forex, cryptos, commodities. Taking advantage of this blockchain technology, Pyth Network updates every 400ms, or more than 200,000 times a day. Oracle is therefore able to provide real-time data to its users, including many Yield Farming DApps (Solend, Tulip, Port Finance), exchanges (Mango Market), AMMs (Lifinity, DeltaFi), derivatives and structured products platforms…
Pyth Network now secures over 90% of the TVS (Total Value Secured) of the Solana network and has supported over $30 billion in trading volume since its inception. Among developers, more than 1,000,000 downloads of Pyth Network have been recorded. A plebiscite that is not about to slow down since Pyth Network is already being exported cross-chain.
Pyth Network, a large-scale deployment
Indeed, since the announcement of the specific blockchain network of the Pyth oracle, the “Pythnet”, many and prominent protocols officiating outside the Solana ecosystem have decided to use the Pyth solution for their oracle needs. Among these, we find the well-known Synthetix (on the layer 2 Optimism), CAP Finance on Decision or even Venus on the BNB Chain (non-exhaustive list).
The innovative data distribution model on demand deployed in December 2022 is no stranger to this. Indeed, while the majority of competitors operate according to a so-called “push” model, meaning that the oracle takes the initiative to transmit information on the blockchain according to predefined conditions, Pyth allows associated applications to request updated data. day when necessary. Thus, Pyth’s on-demand model allows access to more recent and therefore more relevant information, when it suits them.
Enabling the democratization of web3 and the adoption of DeFi like the traditional financial sector means first of all solving the problem inherent in oracles: the provision of accurate and verified information in real time. A tour de force achieved by Pyth Network by driving a large number of top-notch financial players to collaborate with each other, serving the DeFi sector. An excellent sign for the development of the domain in the coming years. By collaborating with companies such as Jump, Pyth places itself in high added value data provider for all DApps in the crypto ecosystem. This valuable information will be able to benefit more and more users in search of financial freedom, the engine of a global democratization that will not be long in coming. Ready to take the challenge ?
