Pyth Oracle’s Way to Bridge Data: Project Overview
Pyth Network is one of the leading oracle solutions in 2024. It’s focused on delivering real-time financial market data across DeFi platforms quickly and accurately.
Oracles are critical to bringing outside data to the blockchain, enabling different use cases like tracking prices for DeFi apps or following sports events for prediction platforms.
The first oracle created to solve the onchain data limitation problem was Chainlink. Launched in 2017, the network made it possible for blockchain to access information from external sources found on the internet.
With time, new blockchain oracles were created. These oracle services rely on different technologies to connect outside data to the blockchain; they typically offer support for different chains and vary in terms of speed, security, decentralization, and focus.
In this article, we’ll take a look at the Pyth Network, covering how it works, what its native PYTH token is used for, and how the network has been doing in 2024.
On the Pyth Network, data publishers provide data directly, while consumers, or data users, request updates on demand and pay for what they need. According to the official website, more than 120 major market participants, including Binance, OKX, Bybit, Jane Street, and CBOE, contribute data to the network.
Pyth originally went live on Solana in 2021, choosing the blockchain for its high transaction throughput (currently 3,329 transactions per second, according to Solana’s live data). Solana's speed allows Pyth to update price feeds faster than most blockchains.
In August 2022, the oracle launched Pythnet, an application-specific blockchain (appchain) to transfer price feeds cross-chain. Since then, Pyth’s oracle program has operated on Solana and Pythnet simultaneously.
As a leading oracle service, Chainlink has established itself as a benchmark for newer oracle solutions. This is similar to how Bitcoin and Ethereum serve as reference points for newer blockchain platforms.
The Pyth Network was founded in April 2021 by Jump Crypto, a division of Jump Trading Group, a prominent Wall Street firm known for algorithmic trading. Jump Crypto has been heavily involved in the Solana ecosystem and is behind the development of Firedancer, a validator client designed to optimize network throughput.
To further advance the network's development, Pyth Data Association, a non-profit, was founded in Zug, Switzerland, in 2021. The association focuses on expanding the network through various programs.
The Pyth Network was launched on the mainnet in August 2021. Initially, the oracle solution was focused on Solana but later expanded to a cross-chain architecture model.
The first oracle created to solve the onchain data limitation problem was Chainlink. Launched in 2017, the network made it possible for blockchain to access information from external sources found on the internet.
With time, new blockchain oracles were created. These oracle services rely on different technologies to connect outside data to the blockchain; they typically offer support for different chains and vary in terms of speed, security, decentralization, and focus.
In this article, we’ll take a look at the Pyth Network, covering how it works, what its native PYTH token is used for, and how the network has been doing in 2024.
Pyth Network Explained
Pyth is a first-party oracle solution, meaning it aggregates data directly from first-party publishers like market makers and exchanges, rather than relying on third-party sources.
On the Pyth Network, data publishers provide data directly, while consumers, or data users, request updates on demand and pay for what they need. According to the official website, more than 120 major market participants, including Binance, OKX, Bybit, Jane Street, and CBOE, contribute data to the network.
Pyth originally went live on Solana in 2021, choosing the blockchain for its high transaction throughput (currently 3,329 transactions per second, according to Solana’s live data). Solana's speed allows Pyth to update price feeds faster than most blockchains.
In August 2022, the oracle launched Pythnet, an application-specific blockchain (appchain) to transfer price feeds cross-chain. Since then, Pyth’s oracle program has operated on Solana and Pythnet simultaneously.
Pyth is the most widely adopted oracle on Solana.
In total, the oracle is available on more than 80 blockchains, delivering data for crypto, equities, Forex, and commodities. The number of applications using the Pyth Network oracle data feeds exceeds 430.
Pyth provides real-time data to more than 80 blockchains. Source: pyth.network
What’s the Difference Between the Pyth Network and Chainlink?
Today, Chainlink remains the largest oracle network, securing more than $31.8 billion in total value across its ecosystem. However, Pyth is ahead in terms of 30-day transaction volume, processing over $50.7 billion, compared to Chainlink’s $44 billion, based on data from DefiLlama.
As a leading oracle service, Chainlink has established itself as a benchmark for newer oracle solutions. This is similar to how Bitcoin and Ethereum serve as reference points for newer blockchain platforms.
The Pyth Network mentions several differences between its protocol and Chainlink.
- Mission: Pyth’s main focus is to provide high-fidelity, high-frequency financial market data to end users securing their DeFi protocols. Chainlink, on the other hand, provides data for broader use cases that include not only financial markets but also gaming, supply chain management, weather, and sports betting among others.
- Data providers: Data on Pyth is provided by financial institutions in TradFi and crypto. On Chainlink, data is transmitted through relayers also known as node operators. Nodes handle incoming data requests from smart contracts and fetch off-chain data from specified APIs.
- Supported networks: As mentioned the Pyth Network is available on more than 80 blockchains, including Apechain, Aptos, Base, Blast, Cronos, and others. Chainlink is available on a smaller number of blockchains, including Arbitrum, Avalanche, Base, BNB Chain, and Celo.
- Oracle update frequency: Pyth's price feed updates every 300 milliseconds, providing fast data broadcasting. On Solana, Pyth updates every 400 milliseconds, 10-15 seconds on Ethereum, 3 seconds on BNB Chain, and so on. On Chainlink, prices are updated when certain conditions are met. For Ethereum, updates can occur once an hour, on BNB Chain once a minute, and on Solana every 5 seconds.
- Transparency: Data provided by the Pyth Network is accessible and verifiable on-chain. Chainlink collects data from external sources, which is not stored on the blockchain by default. Applications must verify the data's reliability on an individual basis.
When Was Pyth Founded and by Whom?
To further advance the network's development, Pyth Data Association, a non-profit, was founded in Zug, Switzerland, in 2021. The association focuses on expanding the network through various programs.
The Pyth Network was launched on the mainnet in August 2021. Initially, the oracle solution was focused on Solana but later expanded to a cross-chain architecture model.
In November 2023, Pyth launched its native cryptocurrency, PYTH, and in December, raised an undisclosed amount in a strategic funding round, with investors including Castle Island Ventures, Multicoin Capital, Delphi Digital, Wintermute Ventures, and others.
In the same year, Douro Labs, based in Portugal, was founded to build tools and infrastructure for the Pyth Network.
Pyth Governance runs on the Solana blockchain. Once proposals are approved they are implemented across all the chains that Pyth functions through the Wormhole messaging protocol.
Besides being a governance token, PYTH is the utility token of the Pyth Network, which is used for payments, rewards, ecosystem incentives, and other purposes.
As of November 2024, over 3.6 billion PYTH tokens are in circulation. PYTH is among the 100 largest cryptocurrencies with more than $1 billion market cap and $172 million daily trading volume. At the time of writing, the token trades at around $0.4, which is 64% down from its all-time high of $1.15 reached on May 16, 2024.
The network is called an appchain due to its purpose-built design optimized to handle data broadcasting. Pythnet relies on a Proof of Authority consensus mechanism where a select group of validators are responsible for approving transactions.
Because there are multiple data publishers on the Pyth Protocol, the oracle needs to combine inputs from different sources to produce a single aggregate price. Pythnet ensures prices are combined correctly and data is secure.
Pyth data from price feeds is accessible online, so anyone can verify the accuracy of the price computation using publicly available transaction logs.
According to DeFiLlama, Pyth is among the 5 largest oracles based on the total value secured. At the time of writing, the oracle's TVS is over $6.7 billion.
K-Lend combines different solutions for DeFi market participants providing leverage and automation. The platform acts as a decentralized matchmaker between borrowers and lenders, also enabling yield farming and earning passive income through deposits. Kamino's native KMNO token is used for staking, governance, and reward incentives within the platform.
Drift offers advanced mechanisms for trading efficiency. Its Dynamic Automated Market Maker (DAMM) solution dynamically adjusts liquidity parameters to optimize capital efficiency and reduce slippage. The platform has its native governance token DRIFT. It uses Pyth as its main oracle to provide real-time prices for trading.
OIS is a staking framework allowing PYTH token holders to stake their assets toward specific data publishers. This way, publishers providing high-quality data earn rewards, while there are penalties for inaccuracies. Stakers supporting publishers share their risks and rewards.
According to a report by Messari, at the end of the third quarter of 2024, OIS had already gathered 135M PYTH tokens of stake. Pyth started using Total Transaction Volume (TTV) as a primary metric to measure its performance, which focuses on the transaction volume it enables. Pyth’s year-over-year growth by this metric was 1362% at the end of September 2024.
Overall, the Pyth Network is a leading oracle critical for hundreds of DeFi platforms on different chains. It has a high demand and is one of the most competitive oracle networks.
PYTH Token Use Cases and Distribution
As the native cryptocurrency of the Pyth Network, the PYTH token plays a critical role in the protocol. PYTH holders can stake their tokens to become members of the Pyth DAO to propose and vote on protocol matters, including reward mechanisms and the selection of price feeds.
Pyth Governance runs on the Solana blockchain. Once proposals are approved they are implemented across all the chains that Pyth functions through the Wormhole messaging protocol.
Besides being a governance token, PYTH is the utility token of the Pyth Network, which is used for payments, rewards, ecosystem incentives, and other purposes.
PYTH Tokenomics
There's a maximum supply of 10 billion PYTH tokens, 1.5 billion of which entered circulation at the time of launch. The remaining 8.5 billion tokens (85%) were locked with a vesting schedule spanning 6, 18, 30, and 42 months after the launch.
The Pyth Network allocated 6% (600 million) of PYTH tokens to community members through a retrospective airdrop. The tokens were distributed among active community members who had used dApps powered by Pyth data up to the launch. PYTH’s overall token distribution looks like the following:
- Private Sales: 10% (1 billion)
- Publisher Rewards: 22% (2.2 billion)
- Ecosystem Growth: 52% (5.2 billion)
- Protocol Development: 10% (1 billion)
- Community and Launch: 6% (600 million)
As of November 2024, over 3.6 billion PYTH tokens are in circulation. PYTH is among the 100 largest cryptocurrencies with more than $1 billion market cap and $172 million daily trading volume. At the time of writing, the token trades at around $0.4, which is 64% down from its all-time high of $1.15 reached on May 16, 2024.
PYTH Tokenomics: Source: coinmarketcap.com
What Is Pythnet in Detail?
Pythnet is a chain built on the Solana codebase, but operating independently. Due to integration with Wormhole, the chain collects and distributes high-frequency data to different applications across multiple blockchains.
The network is called an appchain due to its purpose-built design optimized to handle data broadcasting. Pythnet relies on a Proof of Authority consensus mechanism where a select group of validators are responsible for approving transactions.
Because there are multiple data publishers on the Pyth Protocol, the oracle needs to combine inputs from different sources to produce a single aggregate price. Pythnet ensures prices are combined correctly and data is secure.
Pyth data from price feeds is accessible online, so anyone can verify the accuracy of the price computation using publicly available transaction logs.
Popular Platforms Using the Pyth Network
Pyth is one of the top popular oracle solutions in 2024, used by various blockchains. It provides practicality by adding data feeds to Pythnet and providing those feeds to each chain the network supports. When expanding to other chains, Pyth can build an oracle contract on it.
According to DeFiLlama, Pyth is among the 5 largest oracles based on the total value secured. At the time of writing, the oracle's TVS is over $6.7 billion.
Total Value Secured by Pyth as of November 21, 2024. Source: defillama.com
Major projects using Pyth's oracle network include:
Kamino Lend
Currently, Kamino Lend or K-Lend is the largest DeFi protocol on the Solana blockchain with a TVL of over $2 billion. The platform accounts for more than 30% of the funds secured by Pyth.
K-Lend combines different solutions for DeFi market participants providing leverage and automation. The platform acts as a decentralized matchmaker between borrowers and lenders, also enabling yield farming and earning passive income through deposits. Kamino's native KMNO token is used for staking, governance, and reward incentives within the platform.
Drift Trade
Drift Protocol is a decentralized exchange (DEX) built on the Solana blockchain, designed to provide high-speed and low-cost trading. It's focused on perpetual swaps, a type of derivative allowing traders to open large trading positions with a small deposit.
Drift offers advanced mechanisms for trading efficiency. Its Dynamic Automated Market Maker (DAMM) solution dynamically adjusts liquidity parameters to optimize capital efficiency and reduce slippage. The platform has its native governance token DRIFT. It uses Pyth as its main oracle to provide real-time prices for trading.
Suilend
Suilend is a decentralized lending platform on the Sui blockchain. It was developed by the team standing behind Solend, a Solana-based lending platform.
Suilend benefits from the fast transaction speed of the Sui Network and uses Pyth to source price data from different exchanges and market makers.
The platform has been growing fast since its launch in March 2024 and now has over $357 million in TVL.At the time of writing, Suilend hasn't launched a native token yet, though the platform has announced its tokenomics and an upcoming airdrop. Called SEND, the crypto will be used for governance and other network activities.
Pyth Network Stats in 2024
The demand for the Pyth Oracle has grown over the years. The network has expanded and introduced several updates. One of them was the Oracle Integrity Staking (OIS) feature, announced in September 2024.
OIS is a staking framework allowing PYTH token holders to stake their assets toward specific data publishers. This way, publishers providing high-quality data earn rewards, while there are penalties for inaccuracies. Stakers supporting publishers share their risks and rewards.
According to a report by Messari, at the end of the third quarter of 2024, OIS had already gathered 135M PYTH tokens of stake. Pyth started using Total Transaction Volume (TTV) as a primary metric to measure its performance, which focuses on the transaction volume it enables. Pyth’s year-over-year growth by this metric was 1362% at the end of September 2024.
State of Pyth Q3 2024. Source: messari.io
Despite the growth and performance, Pyth also faces challenges. The oracle focuses heavily on the Solana network and uses Wormhole for cross-chain communication. Therefore, any possible Wormhole exploits may cause data feeds to go offline, and integrations with other blockchains can be complex.
Overall, the Pyth Network is a leading oracle critical for hundreds of DeFi platforms on different chains. It has a high demand and is one of the most competitive oracle networks.
FAQ
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Anahit Avetisyan
Author
Web3 writer and crypto HODLer with a keen interest in market trends and recent technologies.
