Project Presentation - Pyth Network

Introduction

Pyth Network is an innovative decentralized infrastructure designed to provide real-time financial data to blockchain applications.

As a next-generation oracle, Pyth Network stands out for its ability to aggregate and publish high-quality market data directly on the blockchain, allowing smart contracts to reliably and securely react to real-world events.

History of Pyth Network

Brief History

• April 7, 2021: The project team made their first public appearance on social media via a tweet.

• May 15, 2021: Accelerated development of the oracle with a successful launch on Solana Devnet.

• August 26, 2021: Mainnet went live.

• January 18, 2022: Official whitepaper released to the public.

Pyth Network quickly became a widely used oracle within the Solana community.

Today, it represents 90% of the total value secured (TVS) for users, with a value reaching up to $2 billion. Additionally, the protocol has processed over $25 billion in transaction volume through transferred data.

Problem Statement

Smart contracts on a blockchain are autonomous and execute automatically, but they cannot retrieve or verify data outside their network.

This limitation hampers their potential because real-world applications often require external data. Oracles serve as gateways, retrieving and verifying this external data for smart contracts.

However, the reliability of oracles is crucial as they have a significant influence on the execution of smart contracts. The data provided by oracles can directly affect the outcome of a smart contract, making the choice of a reliable oracle essential.

This is why Pyth Network, as a decentralized oracle, attracts attention as a solution provider.

Pyth Network

Pyth Network is an innovative decentralized oracle that collects financial market data from over 90 direct data providers, including leading global exchanges and market-making firms such as CBOE, Binance, OKX, Bybit, and others.

The network encourages market participants like exchanges, market makers, and financial service providers to directly publish price data on the blockchain, collected during their existing operations.

These first-hand data are continuously aggregated by the network and made available to applications, whether on-chain or off-chain, via a price service API.

Thus, Pyth Data users can update prices on the blockchain at any time without prior authorization.

Some of the main users of Pyth data include:

• Synthetix

• Ribbon Finance

• TradingView

• Venus

• Hashflow

• Drift

• Zeta Markets

• Solend

Value Proposition and Operation of Pyth Network

Pyth Network is an oracle protocol built on Solana that connects market data owners to applications across multiple blockchains.

More than 350 protocols on 55 blockchains trust Pyth to secure their applications.

Pyth Network positions itself as a solution offering a robust, decentralized, high-quality market data infrastructure with low latency.

The data collected by Pyth Network is aggregated to ensure accuracy and reduce the risk of manipulation. These data are then published on the blockchain, where they can be accessed and used by smart contracts.

Pyth Network operates in a decentralized manner, enhancing the system's security and resilience. Data is published by multiple independent sources, which reduces the risks of a single point of failure or malicious manipulation.

Three Pillars of Pyth Network

Data Providers

The data providers are essentially the contributors to Pyth. These include global exchange platforms, trading firms, market makers, and other institutional and decentralized market players.

This ecosystem of data actors forms a diverse community that directly supplies its own data.

Pyth specializes in two types of price data:

• Prices of tradable assets from exchange platforms

• Prices of the most recent trades from traders

Pythnet

Pyth relies on a dedicated protocol for aggregating data from various providers, generating a unified price and a confidence interval every 400 milliseconds for each price feed.

This aggregation is carried out on an Appchain named Pythnet, configured via a Proof of Authority (PoA) consensus mechanism. This approach ensures the robustness and accuracy of the aggregated data.

Glossary Summary

• Appchain: Appchains are specialized blockchains designed to meet the needs of individual applications. They can improve scalability by allocating specific resources to the application and offer more flexibility through a modular architecture.

• Proof of Authority (PoA): PoA is a consensus mechanism that emphasizes the social capital of node validators. In this system, the community selects and grants the most trusted users and strategic partners of the project the right to produce new blocks. These users have a direct long-term interest in the network's future success.

This Appchain securely aggregates prices from data providers into a single smoothed price for each Pyth price feed. Pythnet is at the heart of Pyth's off-chain price feeds, serving all blockchains.

Pythnet utilizes Solana technology, using the same validation software, but operates as a Pyth-specific blockchain, distinct from Solana's main network.

Data Users

The end applications, which operate on blockchains supported by Pyth, consume these aggregated price feeds and efficiently integrate them into smart contracts.

Pyth is distinguished by its "Low Latency Pull Oracle" architecture, or more simply "Pull Oracle," allowing data users to request price updates as needed.

This innovative approach is cost-effective in terms of gas fees since users only pay for necessary updates, avoiding the wastage of gas fees for unused updates.

Pyth Network Products

Pyth Network offers several products for developers:

• Price Feeds provide real-time prices for over 500 assets across more than 55 blockchain ecosystems, including Solana, various EVM chains, Aptos, Sui, NEAR, and multiple Cosmos chains.

• Benchmarks offer historical Pyth prices for use both on-chain and off-chain.

• Express Relay allows protocols to eliminate MEV (Miner Extractable Value) while accessing active searchers and liquidators.

• Entropy enables developers to generate secure random numbers on the blockchain.

Network Participants

Three different types of actors interact within the network:

• Publishers publish price feeds and earn a share of data fees in return. They are typically market participants with access to accurate and timely price information. The protocol rewards publishers proportionally to the amount of new price information they share.

• Consumers read price feeds, integrate the data into smart contracts or dApps, and may pay data fees. Consumers can be on-chain protocols or off-chain applications.

• Delegators stake tokens on a specific product and publisher to earn a share of the data fees, with the potential loss of their stake if the oracle is inaccurate.

Any actor can play multiple roles within the network. For example, data publishers (or consumers) may also choose to delegate tokens to earn additional data fees.

Incentives and Governance

Publishers

Publishers are incentivized to stake PYTH tokens to participate in the protocol and earn a share of the rewards. They receive a portion of the data fees for the products they provide, and these fees can increase based on the usage of the price feed by consumers. Publishing incorrect data, whether intentional or not, can result in a reduction of the publisher's stake.

Consumers

Consumers are incentivized to pay data fees for two main reasons:

1. Risk Reduction: These fees help applications mitigate the risk associated with using Pyth price feeds, as a payment is guaranteed in case of an issue.

2. Attracting Publishers: Paying these fees attracts more publishers to the product, thereby enhancing the reliability of the price feed.

Delegators

Delegators are incentivized to participate in the protocol to earn data fees from consumers. Initially, delegators receive substantial payments, but competition among them will reduce these payments as the market becomes more efficient.

Use Cases

Pyth Network has numerous potential applications, particularly in the field of decentralized finance (DeFi):

DeFi Platforms

Protocols such as lending platforms, exchanges, and derivatives markets require accurate price data to operate efficiently and securely. Pyth Network can provide real-time data, enhancing transaction reliability.

Predictive Markets

Predictive markets rely heavily on precise and up-to-date data to evaluate the probabilities of future events. Pyth Network can supply this information, enabling more accurate predictions.

NFTs and Blockchain Gaming

In the realm of NFTs and blockchain games, real-time data can be used to trigger in-game events, adjust dynamic pricing, or verify the authenticity of digital items.

Pyth Network VS ChainLink

Advantages of Pyth Network

The pull request feature and the Publisher network provide Pyth's key advantages over Chainlink, which uses a periodic information distribution system.

According to Brian Selkis of Messari, the Publisher network has an indirect advantage over traditional reporter networks.

Reporter networks often face data fragmentation, making them unreliable for institutional investors managing large volumes of capital.

Easy volume manipulation and differences in the APIs used contribute to latency issues and incorrect asset and fee evaluations.

Market makers are generally willing to invest to obtain quality data. Pyth's model is attractive to them as it not only compensates them if they become publishers but also offers access to enhanced global data. The collective participation of publishers helps to reconstruct accurate price streams.

Could Pyth Compete with Chainlink in the Market?

Ryan Selkis does not comment on Pyth's ability to take market share from Chainlink but highlights the possibility that DeFi platforms might choose to use multiple oracles to diversify their data sources.

A concrete example is Synthetix, which uses Pyth on Optimism while also combining Chainlink on other blockchains to ensure the most accurate pricing possible.

The coexistence of different oracle technologies is beneficial for the crypto ecosystem as a whole, offering a broader range of composable tools to achieve various objectives.

Large-Scale Deployment

Since October 16, 2022, Pyth has been integrated with the Synthetix application on the Optimism blockchain, and more recently, with Base, developed by the Coinbase exchange.

The Pyth oracle already allows DeFi users to gain exposure to tokenized versions of gold and silver on the Synthetix app, as well as forex and certain tokenized stocks.

Duet Protocol also offers tokenized U.S. stocks, with prices based on Pyth’s data streams. Additionally, Pyth is expected to quickly support prices for recently approved Bitcoin ETFs.

Tokenomics

• Token Symbol: PYTH

• Market Rank: 73rd

• Max Supply: 10,000,000,000 PYTH

• Circulating Supply: 3,624,988,914 PYTH

• Initial Supply: 1.5 billion PYTH (15% of total)

• Valuation: $1,109,780,773

• Vesting: 85% of PYTH tokens are initially locked, and the locked tokens will be unlocked 6, 18, 30, and 42 months after the initial token launch.

The PYTH Token: Its Roles and Uses

The PYTH token plays a crucial role not only as a value vector but also as an essential functional backbone supporting and facilitating operations on the platform. Here are the various uses of the token:

• Incentives: PYTH is used to reward active participants in the ecosystem, including data providers and validators. This incentive system encourages significant contributions and ensures the quality and reliability of data within the network.

• Governance: PYTH token holders have the right to participate in key decisions about the future of the platform through a voting system (protocol updates, integration of new features, management of collective resources).

• Staking: By staking their tokens, users can participate in consensus processes or secure certain operations on the platform.

• Access and Subscription Fees: PYTH tokens can be used to pay for access fees or subscriptions to premium services on the platform, such as access to exclusive data or advanced features.

By combining these functions, PYTH is not just a value instrument but also a vital component that drives and secures the entire PYTH ecosystem.

Partnerships and Fundraising

Pyth Network Authena completed a fundraising round on December 4, 2023, the exact amount of which has not been disclosed. Among the investors contributing to this round were Castle Island Ventures, Multicoin Capital, and Wintermute, with a total of 8 investors participating (including Borderless Capital, CMT Digital, Bodhi Ventures, Distributed Global, and Delphi Digital).

Conclusion

In conclusion, Pyth Network represents a significant advancement in the field of decentralized oracles, providing precise, reliable, and real-time market data for blockchain applications.

Pyth Network offers several distinct advantages over existing solutions:

• Precision and Reliability: By partnering with leading data sources, Pyth Network ensures superior accuracy and reliability of the data provided.

• Transparency: All data published by Pyth Network is available on the blockchain, offering complete transparency and the ability to verify the origin and integrity of the information.

• Efficiency: Pyth Network's ability to deliver data with minimal latency, thanks to Solana, is a major asset for applications requiring rapid and frequent updates.

By addressing issues of latency, data quality, and security, Pyth Network paves the way for a new generation of smarter and more reliable smart contracts and decentralized applications.

With its innovative approach and strategic partnerships, Pyth Network is well-positioned to become a key pillar of the blockchain ecosystem.