Even after an extreme crypto winter, the cryptocurrency industry has recovered at an impressive pace. But despite the sector’s recovery in recent months, decentralized finance still represents only a small portion of active financial markets. The total cryptocurrency market cap is currently around $2.5 trillion.
To put that into perspective, the US financial market alone represents $42.6 trillion. For companies and projects in the blockchain sector, access to information from this much larger market is crucial. To meet this need, companies have turned to blockchain oracles – code bridges that bring real-world data from off-chain to the blockchain.
But even within the blockchain oracles, different styles of information collection and delivery are beginning to divide the industry. On the one hand, older oracle systems have fixed billing structures and an isolating nature that some companies find at odds with Web3’s ideas about community. On the other hand, you have more recent projects that focus on community-oriented services, using DAO structures that are more reminiscent of blockchain’s central mission.
In this article, we compare two blockchain oracles, Pyth and Chainlink, discussing 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 provide off-chain market data from trading institutions to any blockchain system. Many aspects of decentralized finance rely on accurate, time-sensitive, and dependent oracle services to retrieve them for them.
One of the first and most popular oracle systems is Chainlink. Founded in 2017, Chainlink has spent many years in the industry building partnerships, expanding offerings, and delivering data to protocols, applications, and companies around the world.
In recent years, alternative oracle options have emerged on the market. Still, most of these offer pricing structures and features similar to Chainlink, blending in with other industry opinions. Founded in 2021, Pyth Network set out to change this by offering a high-fidelity, low-latency, frequent updates, and reliable data delivery service.
Currently, Pyth works on more than 50 different blockchains and regularly provides data to 300 dApps. Yet it is not their vast reach that has thrust them into the spotlight, but rather their unique method of delivering data to the entire spectrum of blockchains, creating a more accessible system for everyone.
Let us explore where these oracles differ.
Chainlink Oracle Delivery
While Chainlink has become one of the industry favorites, it does so through a fairly outdated operating model. When an application wants to collect real-time data, it works with automation from the Chainlink network. Applications must hire these individual nodes for their services.
Nodes continue to operate for a predetermined amount of time and only publish data on-chain for the application that paid for that service. Because each network of nodes is fragmented, there are no broader effects from each of these individual paths. They all rely on off-chain economies to manage and collect data, creating a highly privatized form of data sharing.
As data becomes a more valuable commodity, this service may cost increasingly unreachable amounts of money. Furthermore, without a community structure in which real-time updates enter every blockchain on the system, this service will only be intended for applications with a budget reservoir to keep the data flowing, thus pricing new entry into the world of blockchain and dApps.
Pyth New Era Oracle Delivery
Pyth understands the potential future conflicts that Chainlink’s pricing structure could lead to and offers a sustainable alternative. Positioning itself as the sole source of truth at inception or t(0). All data that becomes available for their services is made equally accessible immediately on all blockchains. Essentially, making data available across all blockchains radically improves the accessibility of oracle services, increasing the longevity of the entire ecosystem as a whole.
Applications do not need to create on-demand pricing requests with Pyth, but rather allow users to pay the network for what they need. By doing this, Pyth is actively taking a stand against the way Chainlink and other models provide data feed updates to their communities. Represents a new era of blockchain oracles that are more accessible to everyone.
Governing structures of oracles
The governance structure of any project in the blockchain space largely indicates how the community will embrace it over the years. The fundamental pillars of decentralized ecosystems have always been about the community itself, creating a transparent and secure place for technological advancement and decentralized progress.
Over the years, companies and new projects in the blockchain space have had the opportunity to vary their governance structures to adapt to this model or create a corporate structure more commonly seen in Web2 spaces. It’s important to highlight how Pyth has gone for the former, trying 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 organizational structure (DAO). The Pyth DAO obtains proposals from the community and then decides whether or not to submit the vote to the community based on a vote (Yes/No).
From there, anyone holding PYTH tokens can vote on the proposal using a 1:1 coin voting system where staking tokens indicates a willingness to vote for or against the favor. This model allows the community to forge their own path and move toward the innovation goals that the individuals who are part of this project believe are most aligned with Pyth’s vision.
This model comes from the heart of decentralized ecosystems and gives every user a fair voice. On the other hand, Chainlink uses a multi-sig contract system, where 9 people have complete power over the direction of the project. If 4 of these 9 people vote for a certain rule or goal, the entire ecosystem will follow.
Chainlink recently faced criticism for this voting structure, with journalists outlining the level of trust the blockchain ecosystem places in a company that uses Web 2 voting structures at the core of their business. Moving from one
While this isn’t a factor that should turn partners away from Chainlink, those interested in seeing blockchain companies champion Web3 ideals may be more hesitant about Chainlink after this revelation.
Final thoughts
Both Chainlink and Pyth offer a high-fidelity blockchain oracle system, which allows on-chain applications to obtain price updates from traditional financial and other off-chain systems. These data sharing mechanisms are essential to the ethos of blockchain, with DeFi using this information in their applications.
While Chainlink is an old choice, with more years in the industry, its somewhat outdated pricing structure, governance and ethos have many looking to new voices. With its bold rejection of existing oracle price structures, Pyth demonstrates its loyalty to the central vision of blockchain systems.
As the price of data continues to rise and the need for this information skyrockets, projects in the blockchain space will place even more emphasis on the importance of oracles. If they do, it will be interesting to see if old choices or projects that align with Web3’s long-term goals will win out.