Decentralized Finance (DeFi) aims to revolutionize the way we manage our funds and empower individuals to take control of their financial lives. Majority of DeFi services require a blockchain oracle, a secure and reliable method for blockchain applications to obtain financial data from the external world.
As we all know that blockchain technology is emerging at a rapid pace and is providing services in various sectors of the economy, however, the biggest hurdle it faces- accumulation and aggregation of real-time data.
Pyth Network is like a bridge between traditional financial markets and blockchain applications, making significant market data available. The PYTH token is designed to power the entire network, with a fixed supply of 10 billion tokens.
As of 2024, Pyth Network has expanded to support over 400 price feeds across various asset classes, making it one of the largest decentralized oracle networks.
In this article, we will understand Pyth Network in detail, its history and use cases. We will also learn about Pyth Network’s future plans and PYTH native token.
What is Pyth Network?
Pyth Network is a decentralized oracle that provides real-time financial data to smart contracts applications on over 100 blockchains.
It is designed to bring real-time price feeds for cryptocurrencies, equities, forex and commodities.
In August 2021, Pyth Network was launched on Solana blockchain. It was developed with an aim to offer high-quality data, mainly to DeFi applications for pricing assets and avoiding trades with inaccurate prices.
History of Pyth Network
2021: Launch
Pyth Network was launched by the Pyth Data Association, backed by Jump Trading and other prominent institutional contributors.
Initially, it started by offering price feeds for over 30 crypto assets across Solana. Ethereum, and Terra blockchains.
By the end of the year, it turned out to be over 40 major financial providers.
2022: Expansion
Pyth Network expanded by launching Pythnet, a proof-of-authority blockchain forked from Solana. It helped in fast aggregation of data. Further, in late 2022, it was integrated with Wormhole Bridge to gain cross-chain capabilities.
2023: Governance Token
In November 2023, Pyth Network launched its governance token PYTH to boost community involvement and also conducted its airdrop.
PYTH Token
PYTH Token is the native token of Pyth Network. It undertakes various utility functions and boosts community participation. It also helps in incentivizing data providers to deliver accurate and reliable information.
Moreover, the token can also be used for governance, where holders have voting rights over future developments and decisions within the network.
Currently, PYTH token is priced at $0.2191 with a market capitalization of $794.99 million.
What Makes Pyth Network Unique?
There are various oracles that provide similar services. But, Pyth Network is different as it does not involve intermediaries to acquire data. Instead, it fetches data directly from several financial institutions, trading firms and major exchanges.
The direct supply of real-time data helps decentralized applications with accurate data, and pricing information without any delay. This makes it important for firms in DeFi sector like lending platforms, trading protocols, and asset tokenization systems.
Pyth uses a unique data aggregation process that collects multiple data points from providers and creates a single reliable price feed, resilient to changes.
To maintain data integrity, Pyth Network uses a strong verification procedure and weighted aggregation method to filter out any extreme outliers and weighs reliable sources more heavily. This reduces the risk of tampering or data manipulation.
Pyth Network operates on a “pull” oracle model, where users can actively request or “pull” the data they need from Pyth Network to their native blockchain environment.
Use Cases of Pyth Network
DeFi Lending Platforms
Pyth Network helps decentralised finance applications by providing a robust solution for off-chain data sharing. This helps lending platforms to calculate accurate loan-to-value (LTV) ratios and automatic liquidations. By providing real-time data, it protects lenders interest and also helps in maintaining stability. The protocols like ReactorFusion on ZKsync and Solend on Solana blockchain use Pyth Network excessively for their smooth functioning.
Decentralized Exchanges
Pyth Network is popular for its real-time data feeds which help decentralised exchanges (DEXs) to receive accurate price updates for assets traded across multiple blockchains. DEX platforms like Drift protocol use Pyth Network because of its low latency data that maintains price discovery and its rapid update feature for its perpetual futures and other derivatives. Hence, Pyth Network assists traders to efficiently respond to volatile markets.
Stablecoins
Stablecoin is a cryptocurrency whose value is directly pegged to fiat currencies like the US dollar, euro or other currencies or commodities. Some of the prevalent stablecoins are Tether (USDT), USD Coin (USDC), and Dai (DAI). This maintains stablecoins’ value through accurate price feeds and protects users from depegging risks.
Derivatives Market
This market is one of the most complex financial markets where data is used to perform various functions. Pyth Network allows platforms in the derivatives market to create difficult instruments like perpetual swaps, structured product vaults, and options. Platforms like Kwenta and other Synthetix projects use Pyth Network’s feeds to provide exposure to digital assets and real-world markets.
Yield Optimization
Protocols related to yield farming and liquidity use Pyth Network’s price data to manage risks associated with staking and optimization of rewards. Pyth Network also helps yield farmers in tracking asset performance and maximizing returns. It also supports dynamic yield-bearing pools, fostering innovation and user engagement across DeFi.
Future of Pyth Network
According to the Pyth Network roadmap, it has multiple expansion plans in the future. This includes achieving cross-chain compatibility with support for more than 50 blockchain ecosystems like Near and Arbitrum.
Its future plans also comprise escalating asset coverage beyond cryptocurrency to include markets like commodities, forex and equities. Pyth Network is useful for both the digital market and the traditional markets.
Additionally, it aims to focus on technical improvements like reducing the latency by 20% and increasing the data providers per feed which strengthens data reliability.
Conclusion
Pyth Network is a decentralized oracle platform that helps in providing real-time and accurate data to platforms, such as DEXs, DeFi, stablecoins and many more. By aggregating data directly from more than 50 trusted financial firms, it increases reliability and prevents the risk of manipulation along with maintaining integrity.
The Pyth Network’s products are permissionless, transparent, low-latency, high-fidelity, and are designed to scale with the growth of Web3.
It provides services like real-time price feeds and benchmarks, accessible to a wide range of financial service providers. Pyth Network delivers high-speed, low-latency data updates to support the Solana ecosystem.
