In the past five or six years, the DeFi ecosystem has experienced rapid development.
From the initial decentralized exchanges and lending agreements to today's complex businesses covering liquidity pledge, leveraged products, derivatives, etc., DeFi has become an important part of the blockchain field.
Behind this, the role of oracles is becoming increasingly prominent.
1. The rise of DeFi and the importance of oracles
The early DeFi ecosystem was mainly centered around decentralized exchanges and lending protocols, such as MakerDAO @SkyEcosystem, Uniswap @Uniswap, Compound @compoundfinance, and Aave.
@aave and Kyber Network @KyberNetwork. At that time, there were few DeFi projects and oracles were not the focus of everyone’s attention. Many projects either built their own data systems or simply did not use oracles like Uniswap V1.
The turning point was the "Summer of DeFi" in 2020. Compound launched a liquidity mining plan for COMP tokens in June of that year, which attracted a large number of users. Subsequently, projects such as Sushiswap @SushiSwap, Uniswap and Yearn Finance also launched their own tokens, and the DeFi ecosystem ushered in explosive growth.
As the number of DeFi projects increases, the importance of oracles has gradually become more prominent. In June 2019, Synthetix @synthetix_io lost $37 million worth of synthetic ETH due to an oracle vulnerability; in February 2020, bZx also suffered a similar oracle attack. These events have made people realize how important a powerful and reliable oracle system is to DeFi. Therefore, Chainlink
Oracle solutions like @chainlink are starting to gain traction.
Today, DeFi is no longer just simple trading and lending, but also covers a variety of complex businesses such as liquidity pledge, leveraged products, derivatives, etc., running on multiple blockchain networks. As DeFi becomes more diverse and complex, the demand for oracles is also increasing.
2. Chainlink: The former oracle overlord
Chainlink is the first decentralized oracle network and the oracle project with the largest market share. It not only provides on-chain and off-chain data transmission services, but also supports cross-chain messaging and blockchain computing assistance.
1. Market and Data Feeds
This is Chainlink's most well-known service, which uses a "push" mechanism, that is, data is automatically uploaded to the chain at regular intervals. It provides the following types of data to applications: Price Information: On-chain price data of various assets. SmartData Feeds: Data for physical assets. Interest Rate and Volatility Data: Data related to interest rates, yield curves, and asset volatility. L2 Sequencer Status Data: Monitors the latest status of the second layer network.
This data is updated by a group of Chainlink oracle nodes, and the update frequency and number of nodes for different data are also different. For example, BTC/USD data is managed by 31 nodes, and when the price change exceeds a certain threshold, the node will automatically update the data. Currently, Chainlink supports 1098 data sources in 18 EVM-compatible networks.
2. Data Flow
Data streaming is a "pull-type" service that only obtains data when dApp needs it. It is faster and suitable for high-frequency data updates. However, this service is not widely used in the market and only supports 122 assets in 6 networks.
3. Pyth Network: Emerging Pull Oracle
Pyth Network is an oracle protocol based on a "pull" mechanism. Its core feature is to obtain data directly from first-party publishers such as DEX, CEX, market makers, etc., rather than through intermediate nodes. These data will be aggregated and sent to Pyth's blockchain network, and transmitted to other blockchains through the Wormhole cross-chain protocol.
Pythnet is an independent blockchain designed specifically for Pyth Network, developed based on Solana but running independently. Currently, Pyth provides price data for more than 850 assets in more than 70 blockchain networks. However, it relies on Wormhole, and once Wormhole has problems, Pyth will also be affected.
4. RedStone: A rising star in the oracle field
RedStone @redstone_defi is a oracle project based on a pull model, aiming to solve the inefficiency of traditional push-based oracles. It adopted the pull model earlier than Chainlink and Pyth, and has a highly modular design, which can customize components such as data sources and verification mechanisms according to the needs of the protocol.
1. Working principle of RedStone
Data collection: RedStone’s nodes collect price data from sources such as CEX and DEX, and transmit it to the Data Distribution Layer (DDL) after signing.
Data distribution: DDL is the off-chain layer that distributes data through the RedStone gateway or Streamr gateway. All data is stored on the decentralized storage protocol Arweave, which facilitates the query of historical data.
Data usage: dApps can obtain data through pull or push methods according to their needs. RedStone also supports a push model to meet the needs of protocols that are accustomed to push oracles.
2. Advantages of RedStone
Oracle model: Both RedStone and Pyth use a pull model. Compared with Chainlink's push model, RedStone has lower costs and stronger scalability. RedStone also supports both pull and push models to meet the needs of more protocols.
Supported networks: RedStone and Pyth support more than 70 blockchain networks, while Chainlink focuses mainly on EVM-compatible networks. The pull model of RedStone and Pyth makes it easier to support new chains, but Pyth relies on Wormhole and is limited in supporting new chains.
Token economy: Chainlink and Pyth both have their own tokens LINK and PYTH, while RedStone’s governance token RED will be launched soon, and a staking and slashing mechanism will be introduced in the future to further enhance security.
Cryptoeconomic security: Pyth ensures data security through staking and delegation mechanisms, and has pledged 348 million PYTH. Chainlink's staking mechanism only applies to ETH/USD data, which is not comprehensive enough. RedStone plans to introduce a staking mechanism after launching the RED token.
Dispute Resolution: Pyth’s dispute resolution mechanism is the most complete, but it is not yet fully decentralized. Chainlink’s dispute mechanism only applies to ETH/USD data. RedStone plans to introduce dispute resolution and slashing mechanisms after launching the RED token.
Re-staking: RedStone plans to develop RedStone AVS to provide higher security through re-staking protocols such as EigenLayer.
Proof of Reserve (PoR): Both RedStone and Chainlink provide PoR services to help institutions verify asset holdings. RedStone also supports the combination of Bitcoin and EVM networks.
5. 2025: A critical year for RedStone
RedStone has quickly become one of the fastest growing oracle projects by providing flexible oracle services. It not only supports pull and push models, but also plans to launch multiple new services such as reserve proof, re-staking functions, etc. In addition, RedStone's zero hacking record has also earned it trust.
With the launch of RED tokens, RedStone will introduce a staking and slashing mechanism to further enhance security. Although Chainlink has dominated in the past and Pyth is also on the rise, RedStone is expected to become the next oracle project worth paying attention to due to its innovation and flexibility.
REDStone ($RED) will be launched on Binance Launchpool as the 64th project. The total supply of $RED is 1 billion, of which 40 million (4% of the total) are allocated by Launchpool, and the initial circulation supply is 280 million (28% of the total). The pre-sale market trading (RED/USDT trading pair) will be opened at 10:00 (UTC) on February 28, and a price cap mechanism will be introduced (up to 200% of the opening price on the first day, 300% on the second day, and 400% on the third day).
Assuming the initial circulation market value is between 200 million and 300 million US dollars, combined with the initial circulation of 280 million coins, the unit price may fall between 0.7 and 1.1 US dollars. The current over-the-counter price is around 1.14 US dollars.
The price cap mechanism introduced by Binance is a new variable. The price on the first day is limited to 200% of the opening price, which means that if the opening price is set at $1, the highest price on the first day can only reach $2. This mechanism is designed to reduce violent fluctuations, but it may also limit the potential for skyrocketing caused by early hype.
$RED #defi #RedStone