coincodex.com
The role of oracle services, which provide real-time market data to DeFi dApps and other startups – is vital to the health of the web3 world. Oracles bridge the gap between blockchain and the outside world, combining on-chain nodes and off-chain infrastructure to establish a data pipeline that, in effect, makes blockchains brainier.
In this article, we consider the merits of two major players in this space, namely Chainlink and Pyth Network, which are currently jostling for dominance. To be clear, both oracle networks offer a raft of unique features and capabilities, supplying feeds to many happy clients. But while each has its merits, a closer examination suggests that Pyth Network may have an edge in certain key areas. Let’s dive in.
The Governance Debate
One of the most significant advantages held by Pyth Network relates to its governance model.
Governed by a Decentralized Autonomous Organization (DAO), Pyth allows community members to actively participate in decision-making processes. From altering oracle fees to introducing new features like reward mechanisms, the community’s voice is critical. The recent election and approval of the inaugural Price Feed Council by the Pyth DAO on March 28 is a testament to this participatory governance model.
Chainlink, while also involving community participation and a network of node operators, has faced criticism from some quarters due to its perceived centralization. The concerns raised by crypto influencer Chris Blec last year about the 4-of-9 multisig contract that controls Chainlink highlight potential vulnerabilities in its governance structure.
“The entire DeFi industry – VCs, DAOs, devs, everyone – is colluding to hide the fact that if 5 people, chosen by @chainlink, ever decide (or are forced) to go rogue, the entire DeFi ecosystem can be intentionally destroyed in the blink of an eye,” Blec tweeted last February.
The entire DeFi industry - VCs, DAOs, devs, everyone - is colluding to hide the fact that if 5 people, chosen by @chainlink, ever decide (or are forced) to go rogue, the entire DeFi ecosystem can be intentionally destroyed in the blink of an eye.
— Chris Blec (@ChrisBlec) February 7, 2023
Seven months later, Blec noted that Chainlink’s multisig had removed a signer, becoming a 4-of-8 multisig, explaining, “This multisig can change *any* Chainlink price feed to provide *any* price that it wants it to provide. Completely centralized under this multisig.”
Chainlink multisig has removed a signer and is now a 4-of-8 multisig.
— Chris Blec (@ChrisBlec) September 24, 2023
This multisig can change *any* Chainlink price feed to provide *any* price that it wants it to provide.
Completely centralized under this multisig. https://t.co/GOAtJXShIV
In short, Pyth’s adherence to the foundational ethos of web3 gives it the W in the governance department.
Cross-Chain Capabilities and Latency
Both Pyth and Chainlink boast impressive cross-chain capabilities, supporting dozens of blockchains including many of the same networks (Ethereum, Polygon, Solana and others). Overall though, Pyth’s capabilities are more extensive as it supports several dozen that Chainlink does not, including Blast, Aurora, Stacks and Sui.
Interestingly, when data is available on Pyth, it is immediately accessible on all blockchains equally. Chainlink, despite having numerous automation jobs across various chains, lacks this level of integrated network effects, potentially requiring separate deployments on each blockchain ecosystem.
In terms of latency, Pyth also excels with near-instantaneous data feeds supplied in less than 400 milliseconds. While known for its reliability, Chainlink updates data every few minutes or seconds, depending on network congestion and gas fees. Needless to say, this difference in update speed frequency can be crucial in fast-paced market environments.
Use Cases and Market Focus
While Pyth is largely focused on DeFi and finance, Chainlink’s versatility allows it to cater to a much broader range of use cases beyond crypto: while AccuWeather leverages Chainlink for weather data, Theta Network taps into its oracles for viewership data to combat ad fraud.
Launched in 2019, two years before Pyth, Chainlink has had more time to establish itself in various markets while Pyth’s specialized focus means its service is more precisely tailored to the needs of the DeFi sector.
Price Triggers vs. Confidence Intervals
One notable difference between the two is their approach to price data. While Pyth opts for Confidence Intervals to ensure uninterrupted price feed availability even during turbulent market volatility, Chainlink employs price triggers, which could limit protocol updates in highly volatile conditions.
Transparency and Data Integrity
Transparency is another area where Pyth excels. Because its data is fully transparent and verifiable directly on-chain, users can have peace of mind about the accuracy of its feeds. Chainlink’s data, on the other hand, resides off-chain and requires node operators to retrieve and verify it individually.
Market Adoption and User Preference
Although several decentralized apps, such as Marquee and Synthetix, switched from using Chainlink to Pyth as their primary oracle in early 2023 – and have since seen their usage and volumes explode – this doesn’t necessarily indicate a market preference for Pyth over its competitor. Chainlink is certainly the more established oracle service having enabled over $9 trillion in transaction value since 2019 and worked with thousands of clients.
Pyth, meanwhile, has worked with hundreds of projects since launching in 2021, securing over $5.5 billion in value.
While both Pyth Network and Chainlink are formidable players in the oracle service market, Pyth appears to have an edge in governance, cross-chain capabilities, latency, and transparency. Its community-driven approach and specialized focus on DeFi make it an attractive option for crypto users. That said, Chainlink’s versatility, longevity and broader market focus cannot be overlooked.
Ultimately, the choice between Pyth and Chainlink will depend on the specific requirements of the user. For those prioritizing speed, transparency, and community governance, Pyth Network shades this particular battle.