An exploration into trending data oracle, Pyth Network.

Greythorn Asset Management
7 min readNov 30, 2023

What is Pyth?

Pyth is a blockchain oracle that allows users to access prices for cryptocurrencies, real-world equities, and more. The site offers price feeds, which publish the price of an investment option within a given confidence interval.

Both the price and the confidence interval are a time-weighted aggregate of Pyth’s individual publishers’ data. These publishers are usually market participants and have access to real-time data. An aggregate is provided to ensure that malicious actors do not have enough power to change the price on the Pyth feed by:

a) reporting false data as a publisher,

b) manipulating the price on another platform (e.g. an exchange) through their trading activities (e.g. buying, selling).

How does it work?

Pyth’s native token, PYTH, will be used for paying update fees. The price feeds on Pyth will remain unchanged until someone pays this fee to update it.

The token will also be used for governance on the following issues (note that this list may be expanded in the future):

  • Update fee size
  • Reward distribution for publishers
  • Approval of software updates to on-chain programs
  • How new feeds are listed on price, including any reference data
  • How publishers are permissioned

Token Summary

Token: $PYTH

Market Cap: $613m

FDV: $4.09b

TVL: N/A

Tokenomics (Initial)

Figure 1: PYTH Vesting Schedule, Source: Pyth Network

The total vesting takes around 42 months in total. This is quite a significant amount of time. What also should be noted is that quite a large amount will be released in May — around the time of the next Bitcoin halving. Furthermore, besides the Community & Launch, all rewards are released at the same rate and at the same time.

A considerable amount will be allocated to Ecosystem Growth, as observed in the following distribution breakdown:

Figure 2: $PYTH Token Distribution, Source: Pyth Network

Investors

With 13 investors, the largest 5 are:

  • CMT Digital
  • Everstake Capital
  • IMC Trading
  • Jump Crypto
  • KuCoin Labs

Competitive Landscape

  1. Chainlink | Market Cap: $7.76b

Chainlink is an oracle for data provision, allowing smart contracts to access real-world data. Its most recent feature, its Cross-Chain Interoperability Protocol (CCIP), allows users a single interface for multiple blockchains. LINK, Chainlink’s native token, is used for node collateral.

2. Band | Market Cap: $187m

Band Protocol is also a data provision oracle. Like Chainlink it can obtain real-world data, but it can also directly connect APIs with the smart contracts. Its native token, BAND, is similarly used for node collateral.

Bullish Fundamentals

  1. Pyth’s aggregation is a particularly competitive edge that allows it to stand out from its competitors. Even if data providers on other platforms are not malicious, they could experience different levels of latency/accuracy that may cause discrepancies in data. Aggregating assists in lowering inaccuracies.
  2. Users are willing to pay to update the data despite concerns expressed in bearish fundamental factor 3.
Figure 3: 30d Transaction Count of Price Updates by Publishers, Source: @cctdaniel
Figure 4: 30d Daily User Interactions, Source: @cctdaniel

3. Reputable Integrations: Pyth is integrated by Synthetix, Vela, UniDex & HMX.

Bearish Fundamentals

  1. The market for data providers is already highly saturated, and Pyth can only provide price data making the amount of data it can provide far lower than that of its competitors.
  2. It appears that the main security measure to protect against malicious data provision is aggregation (permissioned publishers can upload for free). However, for this to work:
  3. There would need to be at least a somewhat substantial amount of publishers.
  4. There could not be multiple attacks at once (or, if there were, an even larger number of publishers would be required to mitigate it).

In the past week, there have only been 39 active publishers.

  1. The cost-benefit structure for Pyth follows game theory’s ‘Volunteer’s Dilemma’:
Figure 5: Volunteer’s Dilemma within Pyth Network, Source: Greythorn Research Team, Data: Pyth Network

where;

  • i describes the individual benefit from having the information
  • l describes the individual loss from not having the information
  • p describes the fees associated with updating the information

If users were required to pay to update the information individually and were the only ones able to access it after paying, then they would be more inclined to pay (left with only cells (2,1) and (2,2)).

However, given the possibility of potentially being able to freeload, users could be highly likely to not pay or to at least wait for the information. For example, if David wanted to invest in ETH, he could just decide to wait to see if there were any updates, as opposed to updating straight away. Not only does this lead to less revenue, but it also leads to a more latent site with prices not being regularly updated.

Closing Remarks

Pyth Network, with its focus on real-world price feeds, presents a unique perspective in the oracle industry. The platform’s innovative approach of aggregating data from individual publishers addresses critical issues of accuracy and latency, setting it apart in a competitive landscape dominated by players like Chainlink. The transparent tokenomics, integration with reputable platforms, and user willingness to pay for data updates showcase Pyth’s notable strengths within the crypto ecosystem.

However, potential challenges, such as a saturated data provider market and the ‘Volunteer’s Dilemma’ payment structure, call for careful consideration. The need for a sufficient number of publishers raises questions about sustained success. As Pyth Network navigates these complexities, its commitment to security, effective governance, and adaptability will shape its trajectory in the evolving blockchain oracle landscape.

References

Band Protocol. (n.d.). Band Protocol — Company. Band Protocol. Retrieved November 20, 2023, from https://www.bandprotocol.com/company

@cctdaniel. (n.d.). Pyth Oracle. Dune dashboards. Retrieved November 20, 2023, from https://dune.com/cctdaniel/pyth-oracle

Chainlink. (n.d.). Chainlink CCIP. Chainlink Documentation. Retrieved November 21, 2023, from https://docs.chain.link/ccip

CoinMarketCap. (n.d.). Band Protocol price today, BAND to USD live price, marketcap and chart. CoinMarketCap. Retrieved November 20, 2023, from https://coinmarketcap.com/currencies/band-protocol/

CoinMarketCap. (n.d.). Chainlink price today, LINK to USD live price, marketcap and chart. CoinMarketCap. Retrieved November 20, 2023, from https://coinmarketcap.com/currencies/chainlink/

Cryptopedia Staff. (2022, February 8). Band Protocol: Decentralized Finance (DeFi) Oracles. Gemini. Retrieved November 21, 2023, from https://www.gemini.com/cryptopedia/band-protocol-oracle-blockchain-defi-band-coin

PitchBook. (n.d.). Pyth Network Company Profile: Valuation, Funding & Investors. PitchBook. Retrieved November 21, 2023, from https://pitchbook.com/profiles/company/470505-07#signals

Pyth. (n.d.). AUD/USD Oracle Price. Pyth. Retrieved November 16, 2023, from https://pyth.network/price-feeds/fx-aud-usd?range=1W

PYTH Data Association. (2023, September 28). PYTH NETWORK: A FIRST-PARTY FINANCIAL ORACLE. Pyth Network. Retrieved November 16, 2023, from https://pyth.network/whitepaper_v2.pdf?ref=pyth-network.ghost.io

Pyth Network. (n.d.). Optimism Agora. Retrieved November 21, 2023, from https://vote.optimism.io/retropgf/3/application/0xfeba07d541bf93651d4278ab2fb91f89b147e6c5d743ea29fe797958997644cf

Pyth Network. (2023, October 17). Understanding the PYTH Tokenomics. Pyth Network. Retrieved November 21, 2023, from https://pyth.network/blog/understanding-the-pyth-tokenomics

Raza, A. (2023, August 14). Chainlink Vs. Band Protocol (2023 Edition). Securities.io. Retrieved November 20, 2023, from https://www.securities.io/chainlink-vs-band-protocol/

Important notice and disclaimer

This presentation has been prepared by Greythorn Asset Management Pty Ltd (ABN 96 621 995 659) (Greythorn). The information in this presentation should be regarded as general information only rather than investment advice and financial advice. It is not an advertisement nor is it a solicitation or an offer to buy or sell any financial instruments or to participate in any particular trading strategy. In preparing this document Greythorn did not take into account the investment objectives, financial circumstance or particular needs of any recipient who receives or reads it. Before making any investment decisions, recipients of this presentation should consider their own personal circumstances and seek professional advice from their accountant, lawyer or other professional adviser. This presentation contains statements, opinions, projections, forecasts and other material (forward looking statements), based on various assumptions. Greythorn is not obliged to update the information. Those assumptions may or may not prove to be correct. None of Greythorn, its officers, employees, agents, advisers or any other person named in this presentation makes any representation as to the accuracy or likelihood of fulfilment of any forward looking statements or any of the assumptions upon which they are based. Greythorn and its officers, employees, agents and advisers give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this presentation. None of Greythorn and its officers, employees, agents and advisers accept, to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information contained in this presentation. This presentation is the property of Greythorn. By receiving this presentation, the recipient agrees to keep its content confidential and agrees not to copy, supply, disseminate or disclose any information in relation to its content without written consent.

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