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Pyth Network is a blockchain-based oracle solution that helps provide real-world data to smart contracts.
Blockchains are designed to be insular, meaning that they are purposely shut off from other sources of information. This is done to ensure that on-chain data is as pure, provable, and correct as possible. While this model may guarantee trustless systems, it is impractical for more widespread adoption because it ignores the outside world that is becoming more connected every day.
Oracles were developed to solve this issue by bridging closed blockchain systems and the real world. These third-party systems create an infrastructure for accurate data transfer to-and-from smart contracts. The concept of blockchain oracles has existed almost since the origin of smart contracts themselves. Early efforts included Augur (a decentralized prediction market conceived in 2014) and Oraclize (which later rebranded to Provable Things). However, Chainlink quickly became the quintessential entry in the market, with its reliable price feeds for decentralized finance (DeFi) protocols.
Launched in 2021, Pyth Network is an oracle originally designed for the Solana blockchain. It has become a multi-chain solution for providing pricing data to the DeFi space. Like Chainlink, Pyth serves the role of an oracle by providing real-world data to on-chain protocols, but its data providers are the main difference. Whereas Chainlink’s pricing data comes from node operators, Pyth’s comes from financial institutions.
PYTH is the network’s governance token, allowing holders to vote for changes to Pyth’s development.
How does Pyth Network work?
Pyth is designed to be a highly accurate and efficient oracle, feeding asset pricing data (e.g., the prices of crypto assets such as BTC and ETH, as well as non-crypto assets like equities) into on-chain DeFi protocols. In this case, “accuracy” refers to the veracity of the asset prices provided by the network, and “efficiency” refers to high-frequency and low-latency updates. Put another way, Pyth aims to provide correct data to its end-users—smart contracts and the crypto traders who use them—as quickly as possible.
The network accomplishes this by using a two-participant system. Consumers are users of smart contracts that pull from Pyth’s pricing feeds, and they are charged a flat rate per request (“update”). Publishers are market participants like trading companies, exchanges, and other financial institutions who provide price data to the network and collect fees from consumers for this service. By using these first-party sources of data, rather than third-party aggregators, Pyth can promise speed and accuracy. However, the project has faced scrutiny because some see this as a form of centralization within the DeFi space.
The protocol’s Pythnet appchain (application blockchain) is a fork of Solana in which each publisher runs a validator on a Proof of Authority (PoA) network. Pythnet aggregates prices from all publishers, so each asset it lists has one reference price. These prices are then broadcast across blockchains through pre-existing cross-chain messaging protocols to on-chain contracts, allowing Pyth’s data to reach users on any number of networks. Furthermore, data is only transferred when users request (“pull”) it, which is more gas-efficient than other oracles that “push” data regardless of demand for it.
Token economics and distribution
There is a maximum total supply of 10 billion PYTH. The token was initially launched in November 2023 and saw 1.5 million PYTH entering the circulating supply, including an airdrop in which 90,000 wallets received 255 million PYTH. Tokens were set to be unlocked at 6- to 12-month intervals over the course of 3.5 years (ending in 2027), and of the total supply 52% were allocated to ecosystem growth, 22% to publisher rewards, 10% each to protocol development and private sales, and 6% directly to the community and through the initial launch.
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