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Pyth eyes cost savings in DeFi with new liquidation tool.
In an interview with Crypto Briefing, Marc Tillement, Director at Pyth Data Association, shared insights into the role of Pyth Network within the decentralized finance (DeFi) space, its innovative approach to oracle services, and bold predictions for the crypto and DeFi sectors.
Pyth’s journey and strategy
Addressing VanEck’s report which speculated that Pyth could surpass Chainlink in total value secured, Tillement acknowledged Chainlink’s head start and its solid footing within DeFi. He pointed out that Chainlink’s success was bolstered by its integration with early DeFi protocols such as Aave and Compound, which collectively account for a significant portion of Chainlink’s Total Value Locked (TVL), currently around $25 billion, according to DefiLlama data.
Pyth, on the other hand, with a TVL of approximately $5 billion, has carved its niche with an on-demand oracle model, which, despite being more cost-efficient for protocols on layer 2 solutions, lacked traction in the Ethereum Virtual Machine (EVM) ecosystem due to its transaction cost model.
“Chainlink uses a push price model. So Chainlink is incurring the fees, the gas cost. So overall for these big protocols like Aave and Compound, they can free-ride Chainlink push updates. If they were to use Pyth they would have to start incurring this gas cost,” said Tillement in a interview at Paris Blockchain Week.
To bridge this gap, Pyth is innovating with a focus on perpetual and derivatives protocols, where its on-demand pricing updates offer superior performance. This strategic pivot is evident in Pyth’s significant volume of trading facilitated by its oracle, dwarfing traditional TVL metrics and showcasing the network’s impact beyond surface-level numbers.
Future developments
Tillement revealed plans for a “liquidation optimizer” product aimed at transforming the borrow-lending market by minimizing liquidation costs. This innovation, possibly coming as early as Q2, could significantly reduce the financial burden on protocols during liquidations, potentially saving them hundreds of millions annually.
“So it’s gonna be out there, hopefully Q2. And we’re going to leverage the whole Pyth ecosystem like we already have an existing borrowing engine,” shared Tillement.
Bold predictions for crypto and DeFi
Looking ahead, Tillement shared several predictions:
The emergence of layer 2 solutions on Solana, with non-EVM layer 2s on Ethereum capturing significant market share.
A Bitcoin ETF issuer will develop their own layer 2 or chain for trading, marking a blend of traditional finance and DeFi.
“We’re gonna see one of these Bitcoin ETF issuers creating their own, either layer two or own blockchain to do their ETF trading on-chain. We’re gonna see this within the next 18 months, said Tillement. ”It’s not DeFi because it’s gonna be KYC permissioned.”
He anticipates a multi-sig security issue related to a layer 2 bridge hack and forecasts surprising growth for Move and Solana VM layer 2s on both Ethereum and Solana.
On-chain equities and Pyth’s position
The conversation also touched on the potential for on-chain trading of stocks. Tillement sees a massive opportunity once regulatory clarity is achieved, highlighting Pyth’s readiness with price feeds for traditional financial markets.
“Very few other oracles have US stock because it’s impossible to find the data or to find it you have to pay millions of dollars for it,” Tillement explained. “We have three US-accredited stock exchanges already giving us data and we have the biggest us trader giving us data”
Pyth’s infrastructure, designed to integrate traditional finance (TradFi) data, positions it as a crucial player in bridging DeFi with the broader financial ecosystem.