Pyth’s Pull core mechanism fits well with blockchain, especially supporting the rapid development of DeFi. Although Pyth is still in its early stages of development and has four times the growth potential compared to the leading Chainlink, it has become the second-largest oracle project in terms of the number of supported blockchains, service networks, and protocol numbers. This article is sourced from an article written by @Peng_Investment and compiled and translated by DeepChain.
Investment Overview
Investment Logic
Investment Risks
1. Data Accuracy and Reliability
2. Decentralization Risk
3. Smart Contract Vulnerabilities
4. Market Competition
5. Regulatory and Compliance Risks
Technical, Business Development, and Competition Analysis
Technical
Business Development
1. Synthetix
2. Helium
3. Eclipse
Competition Analysis
1. Market Position
2. Competition Analysis
Team and Financing Situation
Team Situation
Financing Situation
Token Economy
Token Total Supply and Distribution
Token Unlocking Schedule
Token Governance Model
Target Valuation
Price Trend and Market Heat
Price Trend
Market Heat
Conclusion
Pyth Network is a next-generation oracle project based on the Solana blockchain. Its core mechanism, the “Pull Price Update Model,” updates only when requested by clients, providing significant advantages in terms of speed (300-400ms high update speed), asset coverage (supporting real-time price feeds from over 90 suppliers, 50+ blockchains, 144 service networks, and 162 protocols), and accuracy (high fidelity) compared to traditional oracles.
In its token economy model, Pyth incentivizes data providers (22%) and ecosystem development contributors (52%), effectively encouraging data providers’ participation and ecosystem development contributions.
As a result, Pyth has experienced rapid development and protects over $5.5 billion in funds across more than 50 blockchains (second only to Chainlink). In February 2024, Pyth’s oracle transaction volume accounted for an average of 20% of Solana’s total transaction volume, and Pyth data providers on Solana paid $225,000 in fees. By May 6, 2024, Pyth Data’s cumulative trading volume reached $2 billion.
Pyth has the potential to become one of the top two oracle projects and compete with Chainlink for the leading position. As a necessary infrastructure for blockchain development, especially in the rapidly growing DeFi market, traditional oracles’ shortcomings in terms of time duration, high cost, and limited data have become apparent. Pyth’s Pull model perfectly addresses these issues and supports the rapid development of the blockchain, particularly the growing DeFi market. The potential of DeFi is enormous, with a total locked value (TVL) potentially reaching trillions of dollars.
Compared to Chainlink, the leader in the oracle track, Pyth is still in its early stages of rapid development. However, it has already become the second-largest in terms of the number of supported networks and protocols, demonstrating its extensive applicability and influence, with four times the growth potential compared to Chainlink.
Additionally, Pyth’s founding team members have extensive experience in blockchain project development and operations, coming from Jump Trading.
As a decentralized oracle network, Pyth Network excels in providing high-precision market data. However, it also faces some potential risks, including:
1. Data Accuracy and Reliability: Extreme market conditions may affect data accuracy, with significant differences between data providers in high volatility markets.
2. Decentralization Risk: Pyth relies on multiple independent data providers and a decentralized oracle architecture, which may be affected if certain data providers encounter issues.
3. Smart Contract Vulnerabilities: As a oracle network relying on smart contracts, Pyth Network faces the risk of smart contract vulnerabilities that could be exploited by hackers.
4. Market Competition: Pyth Network faces fierce competition from other oracle solutions such as Chainlink. Continuous innovation and differentiated services are necessary to maintain a competitive advantage.
5. Regulatory and Compliance Risks: With the increasing regulation of cryptocurrencies and blockchain technology globally, Pyth Network may face regulatory and compliance risks that could impact its operations and development.
Pyth Network is a next-generation oracle project initially based on the Solana blockchain and later transitioned to its own chain on the Solana blockchain.
Pyth consists of three core components:
1. Data Providers: Mainly exchanges.
2. Pyth Oracle Protocol: Aggregates algorithms to unify prices and confidence intervals from different providers every 400 milliseconds.
3. Data Users: End-users, such as applications on supported blockchains, read aggregated price data and seamlessly integrate it into their smart contract logic.
Pyth’s core mechanism, the Pull Price Update Model, provides significant advantages in terms of speed, broad asset coverage, and accuracy:
1. Speed: High update frequency of 300-400ms compared to minutes to hours for traditional oracles (even for the leading oracle Chainlink) and low latency due to off-chain price updates.
2. Broad Asset Coverage: The Pyth protocol can scale to thousands of data feeds, supporting real-time price feeds from over 90 data providers, including traditional financial institutions, crypto markets, forex, commodities, and more. This is thanks to Solana’s advantages in high throughput and low-cost transactions. Pyth is the second-largest in terms of the number of supported networks, serving 144 networks, second only to Chainlink’s 353.
3. Accuracy (High Fidelity): Pyth obtains data from both traditional and decentralized financial data creators, focusing on first-hand data. Pyth collaborates with over 40 top institutional data providers in traditional finance and crypto markets, such as Bloomberg, Hong Kong Stock Exchange, Nasdaq, Jump Trading, Virtu Financial, GTS, and Solana.
Pyth’s Pull Price Update Model works as follows:
Most oracles solve the data aggregation problem through two models: push and pull. Most oracles use a third-party push model, where oracle nodes retrieve data from first-hand or second-hand sources (data aggregators like CoinGecko and Kaiko). For example, Chainlink’s primary price feed oracle nodes retrieve data from second-hand sources.
Push model oracles push price updates to individual blockchains at set time intervals, incurring gas fees for each on-chain update. Adding price feeds or reducing on-chain update latency adds more costs to the oracle network, hindering its scalability.
Moreover, obtaining data requires multiple trust assumptions: the primary source is correct and stable, the secondary source is correct and stable, and the oracle network is stable.
To address the drawbacks of the push model, Pyth Network proposes the pull model. On one hand, through its network of first-hand data providers, Pyth eliminates the two trust assumptions of third-party data reliability. First-hand data is provided directly by exchanges, market makers, and DeFi protocols like Jane Street, Binance, and Raydium.
These data providers are incentivized by tokens (explained in the token economy model) to act honestly and provide robust and accurate data to maintain a good reputation and avoid being banned by protocols.
On the other hand, the pull model shifts the cost burden to the end data users, reducing the overall network costs. Price feeds are updated based on demand, rather than set time intervals. When data users initiate a price update, the update is pulled into the same DeFi transaction on the chain (e.g., asset swaps, perpetual settlement, etc.). Pyth redirects these costs and efficiently scales the network, as demonstrated by its frequent updates to 451 price feeds.
Pyth Network is not limited to specific blockchains and has already been adopted by numerous projects. Here are some notable project integrations:
Synthetix: A decentralized liquidity protocol that allows for the creation of synthetic assets called Synths, which track the value of cryptocurrencies and real-world assets (such as currencies, commodities, and stocks). Synthetix relies on Pyth Network oracles for high-fidelity, real-time price feeds, crucial for maintaining the accuracy of Synths’ value.
Helium: A decentralized Internet of Things (IoT) network that incentivizes participants to deploy wireless devices and provide coverage to the network through a token-based economic incentive system. Helium utilizes Pyth Network oracles to provide accurate on-chain market prices for its native token HNT. These prices are crucial for various network activities, including converting burned HNT into data credits (DC) and accurately measuring fund allocation.
While Helium is not DeFi, its use of Pyth Network oracles in the decentralized connectivity platform highlights the importance of accurate data in managing protocol economics, even in traditional DeFi.Eclipse recently raised $50 million in Series A financing to launch the first second-layer blockchain that uses the Solana Virtual Machine (SVM) for execution and Celestia for data availability, while leveraging Ethereum as the settlement layer for security. The launch of Eclipse will attract liquidity from Ethereum users and guide them towards decentralized applications on the second layer of Solana. As the leading oracle for Solana, Pyth will support many extension packages for applications launched on Eclipse.
Pyth Network is currently considered the fourth-largest oracle project, with a total value locked (TVL) of $2.112 billion, second only to Chainlink, WINkLink, and Chronicle.
In terms of the number of service networks, Pyth ranks second, serving 144 networks, second only to Chainlink’s 353.
CertiK has given Pyth a security score of 87.53, placing it in the top 10% among the protocols they surveyed.
The oracle space is a fiercely competitive industry dominated by Chainlink. Critics refer to Chainlink as a “black box” due to the lack of transparency in how oracle nodes obtain data. Data sources are not indicated on-chain or on the Chainlink oracle node website. In contrast, on the Pyth network, every data point can be traced back to the public keys of the respective providers by copying the transaction hash value from Pyth’s price information webpage to any Solana block explorer. Although data on Chainlink can also be traced back to Chainlink oracle nodes, Pyth’s data providers are first-party sources. However, the public keys of the providers are not publicly associated with their identities, adding an additional layer of trust network for Pyth to manage its providers, initially composed of approved providers.
Pyth focuses on traditional financial and cryptocurrency price information, while Chainlink offers a variety of products, including the Cross-Chain Interoperability Protocol (CCIP), Reserve Proof-of-Information sources, developer tools (VRF, API capabilities, and automation services), and its market data sources. Therefore, Pyth’s main product challenges Chainlink’s leading market data feed product, although Pyth also provides a random number generator through Pyth Entropy.
In terms of applications:
Pyth protects $5.5 billion in funds across 162 protocols on more than 50 blockchains.
Chainlink protects $38.7 billion in assets across 371 protocols on 19 blockchains.
Both systems have their advantages and disadvantages in terms of market data information flow. Pyth’s model is more suitable for scaling the quantity of price information flow while maintaining a high update frequency. However, Pyth’s ability to maintain high-fidelity data relies on the assumption that the cost of reputation and consensus outweighs any potential benefits of malicious behavior for the providers. Its network stability depends on the normal operation of Wormhole.
In contrast, Chainlink’s model has lower trust in the original data sources, as well as the relationship between the oracle network and the supported blockchains, as it obtains data from secondary aggregation sources and publishes it directly to the target chain. However, expanding the data information flow and covering a wider range of blockchains comes at a higher cost. Therefore, as the cryptocurrency market continues to grow, new protocols need to consider and balance the cost and risk of implementing different oracle price information flows.
The startup company is Douro Labs, and its core members include:
CEO: Michael Cahill, who previously worked on special projects at Jump Crypto.
COO: Ciaran Cronin, who previously worked at Jump Trading and holds a master’s degree in Financial Economics from University College Cork.
CTO: Jayant Krishnamurthy, the Chief Technology Officer of Douro Labs, a developer for Pyth, and a software engineer at Jump Trading. He holds a Ph.D. in Computer Science from Carnegie Mellon University.
CIO: Harnaik Kalirai, former Chief Integration Officer at Jump Trading, with years of experience in system integration and operations, graduated from the University of Bedfordshire in the UK.
In addition, it is understood that besides the above core executives, members of the Jump Trading team are also important contributors to Pyth’s code:
Jeff Schroeder: Technical Director at Jump Trading, primarily responsible for Pyth’s core code.
Samir Islam: Technical Director at Jump Trading, Oxford University computer science master’s degree, involved in Pyth’s code work.
Evan Gray: Vice President of Engineering at Jump Trading, involved in Pyth’s code work.
Alex Davies: Product Development Director at Jump Trading, one of the early 10 employees at Jump Trading’s European branch, also involved in Pyth’s code work.
Rootdata disclosed that Pyth has received investments from institutions such as Delphi Digital, Ailliance Dao, GBV Capital, Republic Capital, HTX Venture, KuCoin Labs, and Ryze Labs, with a current market value of over $500 million. It is worth noting that PYTH has also received a grant of 40,000 OP from the OP Foundation.
To support the development of Pyth, the Pyth Data Association, headquartered in Switzerland, has been established. Its members include heavyweight institutions on Wall Street, such as Jump, SBF’s former employer Jane Street Capital, SIG, and market maker Virtu Financial.
The maximum supply of PYTH tokens is 10 billion, with an initial circulation of 1.5 billion (15%). The remaining 85% of PYTH tokens are initially locked and will be unlocked after 6, 18, 30, and 42 months following the initial token issuance. The specific allocation is as follows:
Issuer Incentives: 2.2 billion PYTH allocated to Pyth Network’s data providers, accounting for 22% of the total supply.
Ecosystem Development: 5.2 billion PYTH allocated to support contributors to Pyth Network, including developers, educators, researchers, etc., accounting for 52% of the total supply.
Protocol Development: 1 billion PYTH allocated to core contributors focused on building oracle tools, products, and infrastructure, accounting for 10% of the total supply.
Community and Launch: 600 million PYTH allocated for initial launch activities and initiatives, with all tokens unlocked on the first day, accounting for 6% of the total supply.
Strategic Contributors (Private Placement): 1 billion PYTH, representing the two rounds of historical financing, allocated to strategic contributors, with all tokens locked and unlocked according to the aforementioned unlocking plan, accounting for 10% of the total supply.
On May 20, 2024, 21.25% of the allocation will be unlocked, with 250 million PYTH unlocked by strategic contributors, 212 million PYTH unlocked by protocol development, 1.12 billion PYTH unlocked by ecosystem development, and 537 million PYTH unlocked by issuer data providers.
On May 20, 2025, 21.25% of the allocation will be unlocked, with the same proportions as above.
On May 20, 2026, 21.25% of the allocation will be unlocked, with the same proportions as above.
On May 20, 2027, 21.25% of the allocation will be unlocked, with the same proportions as above.
The PYTH token is an SPL token on Solana (equivalent to ERC-20 on Ethereum). Its core function is governance. PYTH holders can guide protocol development through staking assets and voting to support Pyth Improvement Proposals (PIPs). Currently, the only proposed and voted-on proposals include the Pythian Council elections and the approval of the Pyth DAO Constitution. Governance covers typical topics that can be modified, including:
On-chain software updates
Reward structure for data providers
Rules for creating accredited providers
Existence of size, denomination, and oracle update fees
Adding new price sources and determining who supports them
The Pyth DAO consists of the Pythian Council and the Price Feedback Committee. Every six months, both committees hold elections to rotate committee members. Additionally, members who have participated for less than one-third of the time will be excluded from re-election. This system ensures active participation of members and aligns with Pyth’s goals. Both committees are responsible for voting and implementing certain operational PIPs.
Pythian Council: The Pythian 7-of-9 multi-signature wallet has eight members and wallet holders who can act as signers. Four members are changed with each election. They have the authority to vote on operational PIPs related to oracle program updates, verification mechanisms, oracle update fees and denomination adjustments, and operations related to PGAS (allocation/delegation to Pythnet validators’ Gas tokens).
Price Feed Committee: The Price Feed 5-of-8 multi-signature wallet has seven members and wallet holders who can act as signers. Three members are changed with each election. They are authorized to vote on operational PIPs related to the management of price feed collection, publisher selection, and feed requirements (i.e., minimum and maximum providers for each source). Currently, proposal creators need to hold 25 million PYTH to create proposals.
The Pyth DAO consists of two types of PIPs: constitutional and operational.
Constitutional PIPs involve protocol updates, determining the structure, and guiding the management of the Pyth DAO. They require over 67% support to be implemented.
Operational PIPs involve finance, Pythian Council and Price Feedback Committee elections and management. Voting for these PIPs can be delegated to committee members and requires over 50% support to be implemented.
Currently, Pyth’s circulating market value is $643.43 million, and the fully diluted valuation (FDV) is estimated at $4.29 billion. In the same period, Chainlink’s circulating market value is $9.71 billion, and the FDV is estimated at $16.54 billion.
Although Pyth ranks fourth, behind Chainlink, WINkLink, and Chronicle, it is the only decentralized pull-mode oracle model among the four, while the others are push-mode oracle models. Moreover, Pyth currently supports over 50 blockchains, far surpassing Chainlink’s 19.
Furthermore, Pyth has rapidly grown to second place in terms of the number of protocols served, with 144, second only to Chainlink, well ahead of the third-place project. Combined with the rapid growth of the decentralized finance (DeFi) market (which has the potential to reach trillions of dollars in total value locked), Pyth has great potential and is expected to become one of the top two oracle projects.
Therefore, we estimate Pyth’s valuation to be half of Chainlink’s total market value, taking into account the current bull market conditions (the price has reached a high of 1.15 this year), giving Pyth a fourfold valuation space. With the current price of 0.4253, the target price is expected to reach 1.7 and above.
The overall trend of Pyth’s price is upward, reaching a high of over 1.15 in early March, and then following the overall market trend, it has declined to 0.4. With the reopening of the subsequent bull market, the price will also return to the upward path.
There is also significant market attention on Pyth, as shown in the following three images:
Although Pyth’s price has experienced a decline due to the overall market correction, market and key opinion leader (KOL) attention to Pyth has always been positive, and there has been a noticeable increase in KOL attention to Pyth recently, indicating Pyth’s technical advantages and future prospects.
Overall, Pyth’s pull-based core mechanism is in line with the rapid development of blockchain, especially DeFi, and its characteristics of high speed, broad asset coverage, and high fidelity are necessary for the flourishing development of blockchain. Currently, Pyth is still in the early stages of development, and compared to the leader Chainlink, it has four times the growth potential. However, it has already grown to be the second-largest oracle project in terms of the number of supported blockchains, service networks, and protocols, only second to Chainlink. Its future is promising.