DeFi enables individuals to take control of their finances, transforming traditional financial systems. However, traditional oracles fell short in providing ultra-low-latency, institutional-quality market data, which is necessary for advanced financial services on the blockchain. In 2020, the Pyth Network was created to address this gap.
Pyth Network was launched on Solana's Pythnet, a fork of the Solana codebase. It serves as a decentralized oracle that sources financial market data from 90+ publishers, including major exchanges and firms worldwide. The data is then distributed across 40+ blockchains.
This guide by Everstake provides a comprehensive overview of staking PYTH in 2024.
What Is Oracle?
Blockchain oracles act as intermediaries between blockchain platforms and external systems, allowing smart contracts to be executed based on real-world inputs and outputs. Oracles enable interoperability between blockchains by connecting them to off-chain data and computation, playing a foundational role in the verifiable web.
Legacy oracles struggle with latency issues, data manipulation concerns, and a lack of decentralization that threatens trust in the system. As blockchain technology advances and applications mature, robust oracles that deliver ultra-low-latency and highly reliable data feeds become vital.
Pyth’s Special Solution
Pyth Network is a decentralized oracle network that provides high-fidelity, real-time financial market data. It serves DeFi apps by sourcing data from various providers, making it a significant player in the blockchain oracle space. To learn more about Pyth, read our overview article.
Pyth Network solves several key issues previously faced by blockchain oracles in the financial sector:
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Need for ultra-low-latency data: Financial markets are highly time-sensitive, with even a few seconds of delay potentially resulting in significant financial implications. Pyth Network guarantees ultra-low latency for time-sensitive financial operations, such as high-frequency trading, by ensuring up-to-date financial data.
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Reliability in data provision: Accurate and up-to-date data is crucial for maintaining the integrity of DeFi services. Inaccurate or outdated data can result in incorrect execution of smart contracts, leading to potential financial losses. Pyth Network aims to reduce such risks by providing reliable data feeds.
Pyth Network's effective functioning is dependent on several crucial components:
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First-party publisher oracle: Pyth ensures highly accurate and timely price feeds by sourcing data directly from primary sources.
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Confidence intervals: This feature allows users to determine the price and the level of uncertainty around it, which is helpful in volatile markets.
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Multi-chain integration: Pyth Network provides solutions for non-Solana chains through integrations like Wormhole.
The Pyth decentralized ecosystem has two key roles:
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Data providers (publishers). These are data owners with legal access to distribute unique data sets.
There are two critical categories: data owners who have not previously worked in data distribution and primary data sources. The former provides cheaper data sourcing, while the latter minimizes latency and expedites on-chain data transfer.
Data providers will earn fees and rewards for staking and publishing correct data. Likewise, if they publish incorrect data, their stake will be slashed.
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Users (Consumers). DeFi and CeFi applications rely on data for various purposes, such as securing a blockchain-based application or providing information.
Applications that use the data to secure the value locked will be encouraged to pay fees to ensure data accuracy further.
Pyth Token
PYTH is the governance token of the Pyth Network. PYTH token holders can participate in governance through staking and governance frontend.
Token holders must participate in the Pyth staking program and stake their tokens to vote on governance proposals. Governance uses a 1:1 coin-voting mechanism for community governance proposals, where each staked token represents one vote.
Even though PYTH staking is currently unprofitable, with no APR/APY available in the network, this can be decided upon with governance in the future. Also, it is important to note that delegators cannot stake for specific validators.
How to Stake Pyth?
Step 1. Visit the official governance frontend.
Step 2: Connect your wallet.
Connect your wallet to the Pyth Staking dashboard using Solflare, Torus, Sollet, Phantom, Glow, Backpack, or WalletConnect protocol.
Step 3. Enter the amount of tokens you want to delegate.
Specify how many tokens you want to delegate and click Stake. Once done, click Approve to confirm the transaction in your wallet.
Congratulations, you're all set! After staking tokens, they become eligible to vote in governance at the beginning of the next epoch. Epochs start every Thursday at 00:00 UTC and last for seven days.
Pyth Network vs. Chainlink
Let's compare Pyth Network and Chainlink, two oracle networks, to see how they differ.
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Pyth |
Chainlink |
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Data sources |
Pyth uses first-party data from exchanges, trading firms, and financial institutions. |
Chainlink sources data from exchanges like Kraken and Huobi and third-party aggregators like BraveNewCoin, CoinMarketCap, and CoinGecko for price feeds. |
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Data fidelity |
Pyth shows aggregated price and Confidence Intervals (CI) for price feeds. The intervals measure an asset's ''true'' price, considering that assets can trade at different prices in various venues. |
Chainlink shows the median price from its data sources once the minimum number of node reporters have reported a price. |
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Transparency |
Pyth's data is verifiable on-chain. |
Chainlink's data exists off-chain and has to be verified on an individual basis. |
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Oracle update frequency |
Pythnet updates prices every 300ms while Solana updates every 400ms. Pyth users can push on-chain updates at every slot without permission. This allows Pyth feeds to update at native blockchain speeds. |
Chainlink is a push model oracle. On Ethereum, Chainlink updates prices once an hour or at 0.5% or 1% price deviation. On BNB Chain, Chainlink updates prices once a minute or at 0.1% to 0.5% price deviation. On Solana, Chainlink updates prices every 5 seconds. |
Everstake’s Place in Pyth Network
Data providers in the Pyth network require dedicated infrastructure to maintain Solana-level speeds for high-frequency updates. Pyth network publishers initiate about 100 million Solana transactions daily to generate 10 million price updates (200k per asset).
Everstake was among the first node providers to join and support the Pyth network.
We also provide RPC services to Hermes By Pyth users through Extrnode. This connects dApps to a decentralized cluster of RPC nodes, with automatic response rerouting during node downtime.
Hermes is a web service that provides a convenient web API for the latest Pyth price updates from Pythnet and Wormhole. It offers a cost-effective way to verify and use the data on-chain.
The Takeaway
While legacy oracles have hindered the progress of blockchain technology, Pyth Network addressed the critical need for ultra-low-latency and highly reliable data through decentralization and staking.
PYTH staking enhances community governance, allowing token holders to actively support the network's development.
Stay up-to-date on the project with real-time GitHub updates, keeping you informed on commits, pull requests, and issues.
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