Is PYTH a LINK Killer?
By Andy Wang | Crescent City Capital Market Analyst Intern
What Is Pyth Network
Pyth Network is a novel oracle solution that aggregates price data directly from exchanges, market makers, and trading firms. It stands out by introducing confidence intervals, offering a more nuanced view of market prices and uncertainties, especially during periods of high volatility or low liquidity. And at the same time, Pyth Network’s speed-focused oracle aims to challenge Chainlink(LINK) as the go-to data source for blockchain finance.
Oracle services like Chainlink have played a key role in spearheading this merger between the old and the new, allowing blockchains to pull in information, such as price feeds, from crypto exchanges and other real-world data sources. But for the marriage of centralized and decentralized finance to prosper, crypto infrastructure needs to rise to the task – meaning traders need access to the kind of minute-to-minute market data that they’ve grown accustomed to in a world of transcontinental cables and high-frequency price feeds.
That’s where Pyth comes in. Like Chainlink, Pyth is an oracle service – a platform that feeds data to blockchains. But Pyth’s market-focused “real-time data” feeds are marketed as faster than Chainlink’s, something that’s supposed to make the service better-tuned to certain financial use cases.
It is definitely worth mentioning that the Pyth Network was originally designed for the speed-centric Solana (SOL) blockchain and later built out into its own chain, Pythnet, based on Solana’s technology, the project claims on its website that it refreshes its data feeds at 300-400 millisecond intervals. Chainlink’s refresh rate, by contrast, can range from minutes to hours.
Chainlink’s comparatively slow pace comes down to how it sources data, by relying on “decentralized” consortiums of third-party data providers and a network of node operators to report out information. Chainlink’s price feeds refresh at set intervals, or dynamically in response to market volatility, but recent latency-focused updates have brought significant speed improvements for some applications.
Pyth, by contrast, as we mentioned above, it sources data directly from first-party financial institutions – both traditional and crypto-centric – like Jane Street and Binance. This institution-driven system carries whiffs of “centralization” – anathema to the disintermediating world of crypto. But Pyth’s sub-second refresh model is several orders of magnitude faster than some competing services, supposedly better-tuned to serving the demands of modern finance.
Like Chainlink and other competing services, the Pythnet network can aggregate its price measurements from multiple sources. Pyth, on its website, claims to rely on various game theory and cryptography practices to ensure its numbers are reported accurately; for example, the “bridge” service that Pyth uses to relay data to blockchains, Wormhole, automatically runs certain checks before reporting numbers to blockchains.
While these validation services can help protect Pyth’s numbers from tampering, the system – like those of other oracle protocols – can still risk measurement errors if multiple sources report inaccurate numbers.
What is Pyth Crypto Token
The PYTH crypto token is an integral part of the PYTH Network, facilitating the functioning of this oracle service. It enables users to participate in the ecosystem, contributing to the network’s operations or accessing its services. The token might serve various purposes within the network, such as governing the platform, incentivizing users to contribute data, or potentially providing access to certain features or services.
How Pyth Network Work
Pyth Network functions as a decentralized oracle, harnessing the collective data submitted by various providers across multiple markets. Here’s a breakdown of how Pyth operates:
- First-Party Publisher Oracle: By sourcing data directly from primary sources, Pyth ensures a high level of accuracy and timeliness in its price feeds.
- Confidence Intervals: This innovative feature allows users to gauge not only the price but also the degree of uncertainty around it, which is particularly valuable in volatile markets.
- Multi-Chain Integration: Initially launched on Solana and its own Pythnet, a fork of the Solana codebase, Pyth Network offers solutions for non-Solana chains through integrations like Wormhole.
- Data Submission: Multiple data providers, carefully selected for each price feed, submit real-time pricing information onto Pyth’s oracle program. This multi-provider approach aims to enhance accuracy and resilience within the system, ensuring a more reliable aggregated price.
- Oracle Program: Pyth’s on-chain oracle program, operating on the Pythnet, processes and combines the data from diverse providers. This aggregation results in a single, composite price and confidence interval. This combined information is then made available on-chain for access by various applications.
- Application Accessibility: The aggregated price data generated by the oracle program becomes public and accessible to applications on the blockchain. Through Pyth, these applications can dynamically retrieve and utilize the real-time pricing information whenever required.
Pyth Network’s Integration: Pyth Network extends its capabilities across more than 40 blockchains, providing crucial real-time data across various sectors, including cryptocurrencies, traditional equities, foreign exchange (FX), and commodities. This integration enables the creation of high-fidelity oracle feeds specifically tailored to meet the stringent security, accuracy, and reliability standards demanded by decentralized finance (DeFi) applications.
Key Components:
- Solana Blockchain Foundation: Pyth Network operates on the Solana blockchain, utilizing its robust infrastructure to maintain and distribute the aggregated data.
- Data Aggregation: Pyth aggregates information from over 90 leading market entities, encompassing prominent exchanges and market-making firms worldwide. This diverse set of data sources contributes to the accuracy and integrity of the pricing data.
Stakeholders in Pyth Network
Pyth Network revolves around three main stakeholder groups:
- Consumers: These are the users of the price feeds, mainly smart contracts and DeFi protocols. On Solana (Pyth v1), these feeds are free, while off-chain access via Pythnet (v2) incurs small fees.
- Publishers: They are responsible for publishing prices and are compensated with PYTH token rewards and a portion of data fees. They must stake PYTH tokens and risk being slashed for errors.
- Delegators: PYTH token holders who stake on price feeds, influencing publisher weights and earning insurance fees. They also face slashing risks if errors occur in the feeds they support.
Reward Mechanism
Publishers within the Pyth Network are evaluated and rewarded based on three criteria:
- Stake Weight (s): The delegated stake to a publisher, measured on a scale from 0 to 1.
- Quality Score (q): Reflects the accuracy of a publisher’s price predictions, ranging between -1 and 1.
- Calibration (c): Assesses the accuracy of a publisher’s reported confidence interval, scored between 0 and 1.
Price
Pyth kicked off the highly-anticipated airdrop of its PYTH token on the first week of November. The new cryptocurrency will double as votes in the protocol’s governance system, meaning the tokens can be “staked” by users who want to weigh in on how Pyth’s tech evolves or who can publish data to its oracles.
In an extraordinary turn of events, Solana-based Pyth Network (PYTH) token has recorded a significant uptick of 10.09% over the last 24 hours, elevating its price to $0.5344. This surge is not just a fleeting gain; over the past 30 days, PYTH has seen an impressive 109.29% increase, underscoring growing investor confidence and market interest in this digital asset.
And the 24-hour trading volume of $96,894,465 USD. We update our PYTH to USD price in real-time. Pyth Network is up 5.13% in the last 24 hours. The current CoinMarketCap ranking is #87, with a live market cap of $800,921,311 USD. It has a circulating supply of 1,499,989,219 PYTH coins and the max.
This remarkable market performance is closely tied to the recent announcement from Pyth Network, a pioneering provider of price oracles in the decentralized finance (DeFi) space. The network has rolled out the second phase of its retroactive airdrop, marking a significant milestone in its roadmap.
Future Analysis
From a fundamental perspective, The low-latency oracle network’s new “strategic partners” include Castle Island Ventures, Multicoin Capital and Wintermute Ventures. They could play a major role in shaping how the platform evolves. As the result of a “strategic fundraising” round announced in the first week of December, some of the crypto industry’s largest players – including some big-name venture firms and market makers – could soon have a loud voice in this new system. The Pyth Data Association, a Swiss non-profit focused on Pyth development, told CoinDesk in the same week, that it has raised funds from crypto heavyweights including Castle Island Ventures, Multicoin Capital, Wintermute Ventures, Borderless Capital, CMT Digital, Bodhi Ventures, Distributed Global and Delphi Digital.
Michael Cahill, the CEO of Pyth developer Duoro Labs and a director of the Pyth Data Association, said in an interview that the new partners all received allotments of PYTH tokens – the assets that double as votes in the protocol’s governance system. “This round expands the Pyth community to new stakeholders and individuals dedicated to advancing decentralized capital markets,” the Pyth Data Association said in a statement. “New stakeholders will help the network grow through enhanced access to new capital sources, participation in governance and protocol improvements, and strategic guidance.”
The Data Association’s new partners are “excited about being able to shape the direction of Pyth and being able to drive this from a truly decentralized perspective,” Cahill said in the interview.
This phase is dedicated to distributing 100 million PYTH tokens, valued at nearly $50 million at the current exchange rate, to over 160 DeFi applications that have integrated Pyth Network’s real-time market data into their operations. Pyth Network’s strategic initiative aims to reinforce its position as the leading first-party oracle network by rewarding and incentivizing a wide array of Web3 applications.
The success of Pyth Network and the subsequent rise in the value of the PYTH token underscore the critical role of accurate and reliable market data in the burgeoning DeFi sector. As blockchain technology continues to evolve, the integration of real-time data feeds will become increasingly vital for the development of innovative financial products and services.
As the PYTH token is still in price discovery mode, we cannot use technical analysis(we have attached PYTH historical price movement below) to inform our price predictions. However, We can look to the future to see what will happen in 2024 that could positively or negatively impact the price and use that information to make an informed Pyth Network coin forecast.
Bitcoin Halving: The next Bitcoin Halving is due to occur in early 2024, and history tells us that its effects on prices are latent, waiting until 12–18 months after the Halving event. However, Bitcoin and cryptocurrencies are the most popular they’ve ever been, and adoption is at its highest. This could mean that more may happen to the crypto markets during the BTC Halving event.
PYTH Listing: PYTH is a new coin and has yet to hit any of the big exchanges, e.g., Binance, Kraken or Coinbase. Being listed on these exchanges, and the announcements of said listings, are often accompanied by a price pump.
Hacks: While the Pyth Network could be the victim of a hack, there also needs to be caution around hacks that could happen to, and even take down, the cross-chain protocols that the Pyth Network relies on to send its data points to other blockchain networks.
Network Popularity: Pyth is a new network offering important utility at a time when the crypto ecosystem is growing. If, or as Pyth Network’s popularity continues to grow, we can expect the PYTH token price to grow along with it.
After looking at the above factors, we can conclude that should everything run smoothly the Pyth Network will continue to grow and it is more than likely that it will be listed on one or more of the biggest exchanges too. As a result, our PYTH price prediction for 2024 is a high of $1.34, a low of $0.35.
Reference:
https://pyth.network/blog/what-is-the-pyth-network
https://coinmarketcap.com/currencies/pyth-network/