The exchange suffered customer losses of tens of millions of dollars due to the oracle crash; without an oracle, contracts are like blind! Smart contracts cannot obtain real-time prices, BTC plummeted but traded on old data, instantly resulting in huge losses! Market manipulators can also take advantage of this, feeding false data to trap users, leading to a collapse of platform trust. DeFi without an oracle is like a driver without GPS, crashing around randomly, lending and derivatives are all in chaos, and fund safety is directly compromised! Oracles like Pyth Network, which update real data in seconds, are the 'lifeline' for contracts, allowing data to run smoothly!
In this competition about data, Chainlink is undoubtedly the most well-known player at this stage. However, recently, a new competitor - Pyth Network, has quietly risen, ready to break the market pattern. Today, we will delve into how Pyth is breaking Chainlink's domination and securing a place in decentralized finance (DeFi) and the broader financial market.
1. Traditional Chainlink - the 'big brother' of the market
Since 2017, Chainlink has been synonymous with the oracle field. Chainlink securely brings external data onto the blockchain, and its 'pull' data collection mechanism is currently the most widely used model in the industry. Data is aggregated through multiple nodes, using a consensus mechanism to verify it to ensure accuracy. This method has provided data support for many blockchain projects (such as Ethereum, Polygon).
However, Chainlink's data update speed is relatively slow, typically updating every few minutes, which may seem inadequate in high-frequency trading (for example, decentralized lending platform Aave). Additionally, while it provides data through node aggregation, the involvement of these third-party nodes also brings some centralization risks to the oracle - this means that certain data may be manipulated or delayed in updates.
2. Pyth Network: a dual enhancement of speed and transparency
Unlike Chainlink, Pyth Network adopts a 'first-party data' strategy - it directly obtains data from financial institutions, exchanges, and banks. This approach avoids the involvement of intermediary nodes, and data update speed has become much faster than Chainlink, reaching sub-second update frequencies. This is particularly important for high-frequency markets (such as cryptocurrency, stocks, and foreign exchange), especially for derivatives and perpetual contracts where speed is critical.
Pyth Network provides direct and transparent data sources, avoiding interference from intermediaries. This makes Pyth one of the most popular oracles in the DeFi ecosystem, especially in areas like synthetic assets and derivatives trading. So far, Pyth has integrated over 50 chains, and the trading volume is expected to surpass Chainlink by the end of 2024, although total value locked (TVS) still lags behind. But there is no doubt that Pyth is growing at a faster rate, with increasing market acceptance.
3. Innovative mechanisms: confidence intervals and contributor incentives
Pyth not only relies on speed to win; it also introduces a 'confidence interval' mechanism, providing confidence assessments for data, helping users accurately identify potential black swan events. This mechanism allows users to assess the reliability of data more precisely in the face of severe market fluctuations, thereby avoiding making erroneous decisions.
In addition, Pyth emphasizes decentralized governance and community participation, with the PYTH token playing an important role. It is not only used to reward data contributors but also facilitates income distribution and decision-making through DAO (Decentralized Autonomous Organization). Unlike Chainlink's LINK token, which is mainly used for staking and payments, the $PYTH token focuses more on fostering a sense of participation and sustainable development within the ecosystem, allowing every participant to benefit from the success of the network.
4. Competitors: Band Protocol, Tellor, API3, etc.
While Chainlink and Pyth are currently the leaders in the oracle market, they are not the only options. Band Protocol (BAND) focuses on cross-chain interoperability, making it a low-cost solution suitable for the Cosmos ecosystem; Tellor (TRB) adopts a 'proof of work' mechanism, although it supports scarce information (such as sports data), its update frequency is relatively low; API3 focuses on 'first-party API', directly pulling data from data providers, avoiding node dependency, but its scale is smaller and covers fewer chains; UMA (UMA) focuses on synthetic assets, combining oracles with optimistic mechanisms, offering unique advantages in certain specific scenarios.
However, compared to these competitors, Pyth's speed and transparency far exceed theirs, especially in the DeFi field, where Pyth has gradually surpassed the support of other platforms.
5. Pyth's vision: to go beyond DeFi and expand to the global market
Pyth's vision is not limited to the DeFi field; its goal is to enter the global market data industry and even surpass a market size of $500 billion. In the first phase, Pyth focuses on providing free market data for DeFi to stimulate participation from users and developers. The second phase is to launch data subscription services for institutional-level clients, including GDP, inflation rates, employment data, etc., becoming a reliable data source for financial institutions.
If Chainlink is the 'giant' in the current market, then Pyth is like a rising star, with speed and innovation being the keys to its prominence. As DeFi gradually merges with traditional finance, the potential of the PYTH network in the future is immense.
6. Conclusion: Who will become the next oracle king?
The flow of information between chains will determine the future winners. Pyth Network, through its unique design philosophy, speed advantage, and transparent decentralized mechanism, has gradually occupied a leading position in the market. As it expands in the global financial market, Pyth is not only aiming to replace Chainlink but also to complement its role in different scenarios, becoming an indispensable part of the future financial world.
