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Even after an extreme crypto winter, the cryptocurrency industry has bounced back at an impressive rate. Yet, despite the rallying the sector has seen over the past few months, decentralized finance still only represents a tiny portion of active financial markets. The total market cap for cryptocurrency is currently around $2.5 trillion.
To put that in perspective, the US financial market alone represents $42.6 trillion. For businesses and projects that exist in the blockchain sector, access to information from this much larger market is vital. To fulfill this need, businesses have turned to blockchain oracles – code bridges that bring real-world data from off-chain onto the blockchain.
However, even within blockchain oracles, different styles of collecting and delivering information are beginning to split the industry. On the one hand, older oracle systems have fixed billing structures and an isolative nature that some companies find antithetical to Web3’s notions of community. On the other hand, you have more recent projects that focus on community-first service, using DAO structures that are more reminiscent of blockchain’s central mission.
In this article, we’ll compare two blockchain oracles, Pyth and Chainlink, touching on their central purpose, how they offer their services, and the ethos and methodology behind their platforms. Let’s dive right in:
Purpose and Objectives of Oracles
Blockchain oracles deliver off-chain market data from trading institutions to any blockchain system. Many aspects of decentralized finance rely on accurate, time-sensitive and rely on oracle services to retrieve it for them.
One of the earliest and most popular oracle systems is Chainlink. Founded back in 2017, Chainlink has spent many years in the industry building up its partnerships, expanding its offering, and delivering data to protocols, applications, and businesses across the world.
Over recent years, alternative oracle options have come to the market. Yet, the majority of these offer pricing structures and features similar to those of Chainlink, making them blend in with other industry opinions. Founded in 2021, Pyth Network set out to change this by offering a high-fidelity, low latency, frequent updating, and trustworthy data delivery service.
Currently, Pyth works on over 50 different blockchains and regularly delivers data to 300 dApps. Yet, it is not their expansive reach that’s shot them into the limelight, but rather their unique method of delivering data to the entire span of blockchains, creating a more accessible system for all.
Let’s explore where these oracles differ.
Chainlink Oracle Delivery
Although Chainlink has become one of the industry favorites, it does so through a fairly outdated model of operation. Whenever an application wants to collect real-time data, it partners with automation from the Chainlink network. Applications must hire these individual nodes for their services.
Nodes will continue to work for a pre-determined amount of time, publishing data on-chain for only the application that has paid for that service. As each network of nodes is fragmented, there are no wider effects of each of these individual jobs. They each must rely on off-chain economies to run and collect data, creating a highly privatized form of data sharing.
As data becomes a more valuable commodity, this service may begin to cost an increasingly unobtainable amount. Moreover, without a community structure where real-time updates enter every blockchain on the system, this service will only be for applications with a budget reservoir to keep the data flowing, pricing out new entries into the world of blockchain and dApps.
Pyth New Era Oracle Delivery
Pyth understands the potential future conflicts that Chainlink’s pricing structure may lead to and offers a sustainable alternative. Positioning itself as the single source of truth at inception or t(0). Instantly making any data that becomes available to their services accessible on all blockchains equally. Fundamentally, making data available across all blockchains radically improves accessibility to oracle services, boosting the longevity of the entire ecosystem as a whole.
Applications don’t have to create on-demand pricing requests with Pyth, instead allowing users to pay the network for what they need. In doing this, Pyth actively takes a stance against how Chainlink and other models offer data feed updates to their communities. Representing a new era of blockchain oracles that are more accessible to all.
Governance Structures of Oracles
The governance structure of any project in the blockchain space greatly indicates how the community will embrace it over the years. The foundational pillars of decentralized ecosystems have always been about the community itself, creating a transparent and secure site for technological advancement and decentralized progress.
Over the years, businesses and new projects in the blockchain space have had the option to vary their governance structures to align with this model or create a business structure that’s more commonly seen in Web2 spaces. It’s important to highlight how Pyth has gone for the former, attempting to create a governance system that represents the ‘By the Community, For the Community’ spirit at the heart of Web3.
Pyth is a community-run and oriented project, using PYTH tokens to host a decentralized autonomous organization (DAO) structure. The Pyth DAO secures proposals from the community and then decides based on a vote (Yay/Nay) whether or not to put the vote to the community.
From there, anyone who has PYTH tokens can vote on the proposal using a 1:1 coin-voting system where staking tokens demonstrate a willingness to vote in or against favor. This model allows the community to forge their pathway, driving toward the innovation goals that the individuals who make up this project think are most in line with Pyth’s vision.
This model stems from the heart of decentralized ecosystems, giving every user a fair say. On the other hand, Chainlink uses a multi-sig contract system, where 9 individuals have complete power over the direction of the project. If 4 of these 9 people vote for a certain rule or objective to pass, then the entire ecosystem will follow.
Chainlink recently received backlash for this voting structure, with journalists outlining how much faith the blockchain ecosystem puts into a company that uses Web 2 voting structures at the core of their business. Moving from a
While not a factor that should turn partners away from Chainlink, those who are interested in seeing blockchain companies that champion Web3 ideals may feel more hesitant about Chainlink after this revelation.
Final Thoughts
Both Chainlink and Pyth offer a high-fidelity blockchain oracle system, allowing on-chain applications to obtain pricing updates from traditional finance and other off-chain systems. These data-sharing mechanisms are vital to the ethos of blockchain, with DeFi using this information in their applications.
While Chainlink is a legacy pick, with more years in the industry, its slightly outdated pricing structure, governance, and ethos are leading many to look to new voices. With its bold rejection of existing oracle pricing structures, Pyth demonstrates its fidelity to the central vision of blockchain systems.
As the price of data continues to increase and the need for this information skyrockets, projects in the blockchain space will place even more emphasis on the importance of oracles. As they do, it will be interesting to see if legacy picks or projects that align with the long-term goals of Web3 win out.