What is Pyth Network (PYTH), and can it "move" Chainlink?
Initially, blockchain ecosystems such as Ethereum, BNB Chain, Tron, Avalanche, and the like were isolated because smart contracts do not provide a function for exchanging data with each other, especially not across different decentralized networks.
Blockchains and DeFi protocols began using oracles, decentralized applications that translate data in a language that smart contracts understand to exchange information.
Chainlink has become the leading solution in this segment, used by most applications and blockchain networks. However, a severe new player has recently entered the market, and its name is Pyth Network.
What is Pyth Network?
Pyth Network is a new blockchain protocol that provides oracles to exchange data between decentralized networks efficiently in real-time.
The Pyth Network protocol can be seen as one of the main competitors of the leading oracle blockchain Chainlink. Even though the Pyth Network blockchain was launched only recently, it has confidently taken the second position in its segment and surpassed in capitalization such solutions as:
- UMA,
- API3,
- Tellor,
- Band Protocol.
The development of the Pyth Network started back in 2020. However, the leading Pythnet AppChain network was launched only two years later — in August 2022.
The Pyth Network team initially planned to launch the protocol based on the Solana blockchain and was focused on its performance. This network is capable of processing up to 65,000 transactions per second. However, the developers still decided to create their own Pythnet blockchain, which is based on Solana technology.
How does the Pyth Network work?
The prerequisite for the creation of the Pyth Network blockchain was the problems of DeFi infrastructure, which hampered the development of the Web3-space as a whole:
- Insufficiently high data update rates. Even in the early stages of development, the Pyth Network team discovered that existing solutions were underperforming and incapable of efficiently delivering data for various use cases, including cryptocurrency quotes for decentralized exchanges. Low data exchange speeds could lead to unreliable information and open the door to attacks, which have happened more than once.
- Limited access of developers to necessary quotes. Another stumbling block was somewhat limited price streams. For example, legacy oracle blockchains can only provide up to 200 streams in the Ethereum network and up to 8 in the new Base blockchain. Typically, blockchains provide only a few streams that can be used across all blockchain networks.
- Poor quality and unreliable data sources. What led to this was a lack of transparency in the data that users and developers use. In other words, developers could not always verify where the data was coming from and how reliable it was, which limited their control over oracles when building Web3 applications.
The Pyth Network was created to address these limitations and provide an efficient, accurate, transparent, decentralized oracle system. The protocol obtains data, such as cryptocurrency prices, from open sources.
The Pyth Network is based on a new incentive-based data distribution model: realizing that the most accurate and valuable data is not freely available, the protocol's developers gave the providers ownership rights. They organized an incentive system based on tokenomics.
As a result, the developers managed to create a relatively efficient network of blockchain oracles. According to the team, Pyth Network is more efficient than the most famous Chainlink solution and can update data streams every 300-400 milliseconds. In comparison, Chainlink's streaming frequency can range from a few minutes to several hours. The Pythnet AppChain network itself, according to the developers, can perform tens of thousands of price updates per second and scale 20 times.
Pyth Network token
The leading cryptocurrency of the Pyth Network is PYTH. This asset is used to manage the protocol: PYTH holders can participate in voting and directly influence the project's development.
Initially, PYTH tokens were distributed among active users of the Ethereum ecosystem and EVM-compatible networks such as Avalanche and Arbitrum, Osmosis, Wemix, and others. About 1.5 billion PYTH tokens are in circulation out of ~10 billion of all existing tokens. However, there is no maximum number of tokens, making PYTH an inflationary asset.
PYTH has a capitalization of over $750 million. However, Pyth Network is still far behind Chainlink, which has over $10 billion in capitalization.
What's next?
The founders of Pyth Network have chosen a suitable development vector, focusing on attracting accurate data providers for the DeFi market, which will eliminate the limitations caused by the use of outdated blockchain oracles.
Technologically, Pyth Network looks more robust than the currently leading Chainlink solution, so its prospects seem encouraging. However, it will take time before Pyth Network takes the lead if it happens.
Pyth Network has already been joined by well-known services and DeFi protocols in the crypto industry, such as:
There are already more than a hundred of them, and the list is constantly expanding.
The Pyth Network aggregates data from more than 95 vendors, including:
- Cboe,
- BTSE,
- Chicago Trading Company (CTC),
- Binance,
- Amber,
- Apifiny,
- Bitbank,
- ByBit and others.
In the future, Pyth Network has a good chance of becoming the leading blockchain oracle solution in the Web3 space. All this is likely to positively impact the dynamics of the PYTH native token.
