Paper introduces new business model for bringing first party data on-chain
ZUG, Switzerland--(BUSINESS WIRE)--Today, the Pyth Data Association, in collaboration with the community of Pyth network participants, announced the publication of its whitepaper that expands on the design of the Pyth Network and the governance structure that will guide the development of the protocol and governance input from PYTH token-holders, who will help secure the accuracy of the data on the Pyth network.
Traditional markets typically maintain strict control over live and historical price feeds, and financial market data is often only available to a limited set of institutions and users. This has made it challenging for centralized and decentralized applications (dApps) to access secure and accurate price updates for cryptocurrencies and data from traditional markets. The Pyth whitepaper outlines how the introduction of data fees and data staking pools can be used to incentivize data contributors to self-publish price data for developers to incorporate into smart contracts or dApps.
The protocol will have three different sets of participants:
- Publishers publish price feeds and earn a share of data fees in exchange. Publishers are typically market participants with access to accurate and timely price information. The protocol rewards publishers in proportion to the quantity of new pricing information that they share.
- Consumers read price feeds, incorporate data into smart contracts or dApps, and optionally pay data fees. Consumers can either be on-chain protocols or off-chain applications.
- Delegators stake tokens and earn data fees in exchange for potentially losing their stake if the oracle is inaccurate.
These participants will interact via four mechanisms. All of these mechanisms will be implemented on-chain:
- Price aggregation combines the price feeds of individual publishers into a single price feed for the product. This mechanism is designed to produce robust price feeds, that is, feeds whose prices cannot be significantly influenced by small groups of publishers.
- Data staking allows delegators to stake tokens to earn data fees. The delegators in aggregate also determine the level of influence that each publisher has on the aggregate price. In addition, this mechanism determines whether delegators’ stakes are slashed. Finally, the mechanism collects data fees from consumers and distributes a share to delegators. The remainder goes into a reward pool that is distributed to publishers.
- Reward distribution determines the share of the reward pool earned by each publisher. This mechanism preferentially rewards publishers with higher quality price feeds and reduces the likelihood that uninformed publishers will earn rewards.
- Governance determines high-level parameters of the other three mechanisms and the protocol broadly.
"Blockchain technology has accelerated a massive transformation that's happening right now in the financial industry," said Mike Cahill, Director of the Pyth Data Association. "The demand for high-quality, reliable, real-time data will only continue to grow as developers build new Web3 dApps and find new uses for first-party data.”
“The Pyth Network will power an autonomous and decentralized marketplace for traditional finance firms to participate in the DeFi data economy,” said David Mercer, CEO of LMAX Group and Pyth Data Association Board Director. “Some of the biggest players in the financial industry, already joined the Pyth network as data providers, contributing to how market data is being used in the DeFi ecosystem.”
The Pyth whitepaper also highlights how PYTH (the native token for the Pyth network) will be used to participate in the decentralized project. With the goal of making the Pyth network self-sustaining, the Association and network participants will guide the initial development of the protocol based on the ideas in the whitepaper, feedback from the broader crypto community, and governance input from PYTH token-holders.
The initial version of the Pyth Network is running on the Solana network and counts Bitstamp, FTX, Jane Street, Jump Trading Group, LMAX Group, MEMX, TwoSigma Securities, & Virtu as data publishers. Leading Solana dApps like Bonfida, Drift, Hxro, Mango Markets, Port, Saber Labs, Solend, Synthetify and Zeta Markets have already integrated with Pyth network to strengthen their protocols' uptime guarantees and automate critical on-chain functions. At the end of 2021, the Network secured $1.17B in total value with over 40 data providers onboarded and 55 price feeds available for use across 15 international communities.
The white paper can be viewed in its entirety at pyth.network.
About Pyth Data Association
The Pyth Data Association is a Swiss association founded by Pyth Network participants to advance the development of the network. For more information, please visit PythDataAssociation.com
About Pyth Network
Pyth connects high-fidelity market data from first-party data owners including exchanges and trading firms to any smart contract, anywhere.
To learn more about the Pyth network, visit pyth.network, visit us on Discord or follow us on Twitter @PythNetwork
Contacts
Carissa Felger
Gasthalter & Co.
(212) 257-4170
pyth@gasthalter.com