The “Oracle War” begins, closely monitoring Flare.
Author: Maelstrom (Arthur Hayes’ family office)
Translator: Felix
Oracle protocols serve as intermediaries between decentralized networks and external data sources, connecting on-chain and off-chain data in a secure and scalable manner. This includes Web APIs, databases, sensor devices, real-time data feeds, and even other blockchain networks. As blockchain applications become more complex, these off-chain data sources become increasingly important for new use cases (such as the recent trend of “machine learning”).
This article will delve into three key oracle protocols: Chainlink, Pyth, and Flare. While Chainlink currently holds the market-leading position, it has limitations in terms of latency and high throughput. Pyth, on the other hand, focuses on financial institutions and lacks universality. Notably, the “dark horse” oracle protocol Flare combines comparable functionalities to Chainlink and Pyth with a fully sovereign L1, making it a unique (and possibly underestimated) protocol. Let’s explore each protocol in detail and their perspectives in this so-called “Oracle War”.
LINK
Chainlink is synonymous with oracles and is the undisputed market leader. Its robust decentralized node network makes Chainlink the preferred choice for many dApps, DEXs, and DeFi platforms. The reliability of Chainlink and its growing list of partners have made it the top choice for institutions and emerging projects. Chainlink’s decentralized oracle network operates through a unique consensus mechanism, utilizing multiple nodes to fetch and verify real-world data. This multi-party approach ensures transparency and minimizes manipulation risks. However, while the oracle network itself is decentralized, analysts have pointed out that Chainlink’s multisignature control maintains a high level of control over protocol price feeds. To ensure data accuracy and tamper resistance, Chainlink employs economic incentives to align the interests of node operators and users.
As of May 2024, Chainlink has integrated with over 500 DEXs and 800 DeFi platforms. Its oracles provide price information for over 5,000 trading pairs, with update times ranging from minutes to hours depending on the chain and asset. Chainlink heartbeats are refreshed periodically or when the price deviates beyond a specified threshold (e.g., 1%).
Chainlink oracles currently have a total value secured (TVS), which is commonly used to summarize the overall economic impact and adoption of oracle networks, of over $20 billion across various data sources and services. The LINK token is used for staking and reputation within the Chainlink network, with a market capitalization exceeding $7 billion. According to Coingecko data, Chainlink’s token represents over 70% of the total oracle market value. Overall, the demand for Chainlink oracle services allows token holders to realize value appreciation as LINK is required to pay service fees to node operators.
PYTH
Pyth is a new oracle protocol focused on financial use cases, utilizing over 90 TradFi and crypto financial institutions as data providers (accessing price data directly from the source for stocks, commodities, and currencies). Pyth’s innovation lies in three aspects:
Quantifying uncertainty: Introducing confidence intervals in its reported prices, allowing users to not only gauge prices but also measure the degree of price uncertainty, which is highly valuable in volatile markets.
Multi-chain: Pyth’s data sources can be used for applications on almost any blockchain. Pyth Network was initially launched on Solana and its own Pythnet (a branch of the Solana codebase), providing solutions for non-Solana chains through integrations like Wormhole.
Efficient price updates: Another innovation introduced by Pyth Network is the Pull Oracle architecture, which achieves efficient, on-demand price updates as opposed to the inefficient Push Oracle commonly seen in traditional systems.
Pyth’s price refresh rates typically range from 300 to 500 milliseconds, several orders of magnitude faster than some competitors’ services, better meeting the needs of modern finance (e.g., DEXs). This speed is attributed to Pyth’s trust model, which relies directly on a few large data providers rather than decentralized nodes to provide price information. Pyth’s trust model is not the only module with a relatively low level of decentralization. Pyth has been susceptible to disruptions in the past due to its reliance on centralized entities like Wormhole. Pyth is also working on implementing staking requirements for data providers to incentivize accurate price feeds.
Despite this, Pyth’s TVS has surged from $500 million to over $4 billion in the past six months, driven by lending protocols. Pyth’s partnership with Solana has been highly successful, combining fast data processing with Solana’s high-throughput infrastructure. Following a successful airdrop in November last year, Pyth plans to offer a new round of Pyth tokens worth $100 million to its over 160 integrated dApp partners.
While Pyth has achieved success in its specific market, it has yet to prove its scalability beyond the financial realm and wider use cases.
FLR
Flare is an emerging competitor in the oracle space, taking a different approach from Chainlink, Pyth, and other competitors. Specifically, Flare is not just an oracle network but also has computational capabilities – namely, an EVM smart contract platform. Flare combines smart contract functionality with its oracle system, where the validators responsible for network consensus and block generation also transmit data to the network. In other words, validators need to successfully provide accurate data to the network to receive validation rewards. Recently, Google Cloud joined Flare as a validator and contributor, along with companies like Figment and Ankr.
Data Connectors and Flare Time Series Oracle (FTSO) are the core of the Flare system:
Data Connectors: Import status data from other blockchains and web services onto the Flare blockchain, such as transaction information.
FTSO: Transmits time series data from multiple chains to Flare. (An ongoing upgrade will eventually provide up to 1,000 data sources every 90 seconds, along with 1-2 block updates)
This unique combination sets Flare apart, as data feeds and proofs are free for dApps running directly on Flare (Flare charges for data elsewhere).
In summary, Flare may be underestimated. While Chainlink has a significant first-mover advantage, numerous projects have integrated with it. However, as Flare gains more attention, it has the potential to quickly catch up to Chainlink. To better illustrate FLR’s potential, here are the following Fully Diluted Valuations (FDV) as of May 1, 2024:
FLR: $2.9 billion
PYTH: $5 billion
LINK: $12.7 billion
If we consider the following background, the above comparison may be quite different:
Flare’s project integration is only 10% of Chainlink’s and is just getting started.
FLR’s token economics incentivize stakeholder and holder participation.
Flare offers both data and computational services, making it fundamentally different from existing oracle protocols – apart from generating fees from data services, it can establish its own native ecosystem.
Flare’s development is still in its early stages, but assuming it can achieve its development roadmap, here are the potential growth scenarios for FLR:
Equal to PYTH: approximately 1.7x
Half of LINK: approximately 2.27x
Midpoint between PYTH and LINK: approximately 3.17x
75% of LINK: approximately 3.3x
The winner of the Oracle War will be the protocol that can provide reliable real-time data, create strong network effects, and adapt to the ever-changing demands of the DeFi ecosystem (including emerging ecosystems involving large and diverse datasets such as artificial intelligence). While it is still too early to draw conclusions, FLR seems to be underestimated compared to tokens in the same category.
Tags:
ANKR
Chainlink
dapp
DeFi
DEX
Flare
LINK
Pyth
SOL
Decentralized
Oracle
Source link:
https://www.panewslab.com/zh/articledetails/83e95kv9.html
Note: The opinions expressed in this article represent the author’s views and do not constitute investment advice.
Original article link:
https://www.bitpush.news/articles/6720061
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