Oracle Integrity Staking: Incentivizing More Secure Prices to Enhance Decentralized Finance Security

The Pyth Network aims to provide strong support for Decentralized Finance applications and bridge the gap between TradFi and on-chain finance. The launch of Pyth Price Feeds in 2021 marks an important step in this mission. As Decentralized Finance continues to expand, the needs of developers and users are also evolving. The demand for security and reliability in Web3 Capital Market is more urgent than ever for smart contract developers and market participants. Reliability efforts at Pyth

Introducing Oracle Integrity stake - an innovation of Pyth price Oracle Machine, which provides a Decentralization stake reward and penalty mechanism for network participants by strengthening accountability for data sources, thus creating a more secure Decentralized Finance ecosystem.

Pyth Publisher (data provider) will automatically receive rewards through the Pyth protocol for maintaining high-quality data contributions. If they provide incorrect data, causing negative impact on the protocol, their stake will be reduced. The Pyth DAO can vote on how to handle the reduced funds, such as distributing to affected users or using for other purposes.
PYTH stakeholders can delegate their stake to Pyth publishers to enhance the potential rewards for providing high-quality data. This helps strengthen the resilience and security of the Pyth Oracle Machine. In return, PYTH stakeholders automatically receive rewards for contributing to the protection of the Oracle Machine network and Decentralized Finance security.

Oracle Integrity Staking covers over 500 price oracles of Pyth, setting a higher standard for the technology and market participants of the Oracle Machine to integrate into the Decentralized Finance ecosystem. This release is an important milestone for Pyth Network in achieving its mission of providing reliable and accurate price data for all blockchains, while also meeting the rising demand for Decentralization and sustainable development.

This article will explore how to enhance the integrity and security of Oracle Machine data through Oracle Integrity Staking, enabling developers to build applications without fear.

The Revolution Brought by Oracle Integrity Staking to Developers

In the field of Oracle Machine, the most pressing challenge is how to provide high-quality and reliable price data in a Trustless manner, covering all assets and blockchains required by developers.

Currently, the available data infrastructure for developers has not been able to provide a sound accountability mechanism to ensure data quality. And existing oracles only provide an on-chain quality control incentive mechanism for relatively secure segments of the market.

At the same time, expanding asset coverage remains a complex challenge for push-type Oracle Machines. Although the pull-type Oracle Machine of PYTH has set a new precedent for quickly expanding price Oracle Machines to new chains, applications using PYTH can still benefit from accessing new, trending, or strategic but yet unpopular assets.

Oracle Integrity 01928374656574839201 through allowing Pyth publishers to be economically responsible for price accuracy and asset coverage, directly addressing data quality and scalability issues.

Price Accuracy

Publishers must stake PYTH Token to be eligible for on-chain rewards, and only when they provide high-quality price data, will they automatically receive rewards.

On the contrary, if the publisher provides incorrect or malicious data, a portion of their stake will be reduced as a penalty. In addition, the Pyth DAO can vote on how to handle the reduced funds, including allocating some or all to users affected by incorrect data, or using the funds to support other purposes of the Pyth Network.

For developers, these results bring greater data trust, allowing them to build without worrying about data integrity and security, and thus to build fearlessly. These safeguards complement the existing reliability practices of the Pyth price Oracle Machine, including on-chain aggregation to exclude abnormal data inputs, and consistency testing for the newly launched Oracle Machine.

Asset Coverage

Oracle Integrity Staking also allows publishers to increase their potential rewards by supporting more symbols (price Oracle Machine). In addition, if publishers start providing data for less popular symbols instead of popular or high liquidity trading pairs that are already supported by many other publishers, their potential rewards will be further increased.

This incentive mechanism makes Pyth a preferred Oracle Machine for smart contract developers when building widely used applications. Regardless of where the development team chooses to build or what type of asset data is needed, Pyth's price Oracle Machine can be expanded to meet these needs.

Protect the Decentralized Finance You Know and Love

The Pyth community also plays a key role in Oracle Integrity Staking, because now PYTH stakers can automatically receive rewards by helping to enhance the security of the Oracle Machine network. By delegating their stake to Pyth publishers, stakers enhance the potential rewards of the publisher, thereby strengthening the resilience and accuracy of the Pyth price Oracle Machine. The stake reward mechanism first rewards the publisher based on data quality, and then distributes rewards to the stakers to recognize their contributions to the network.

This mechanism empowers stakers to provide a unique way for publishers to support more symbols and asset types, while also ensuring high data quality. It is worth noting that the reward and slashing mechanisms of Oracle Integrity Staking not only affect publishers but also impact the stakers who support them. Publishers are responsible for the data they provide to the Oracle Machine, while stakers help strengthen the Oracle Machine network by choosing which publishers to support.

How Oracle Integrity Staking Works

Oracle Integrity Staking allows anyone to participate in protecting Pyth and maintaining the security of the Decentralized Finance ecosystem. The program introduces stake rewards and slashing mechanisms for Decentralization, incentivizing publishers and PYTH holders to stake tokens, thereby strengthening the integrity of the Oracle Machine.

stake reward and reduction mechanism

The core of Oracle Integrity Staking is the staking pool, each of which corresponds to a different publisher. Each participating publisher can stake PYTH Tokens on their own to receive performance rewards for the data they publish. PYTH stakeholders - the members of the Pyth community - choose the publishers they want to support and can stake PYTH Tokens in any publisher's staking pool, helping to secure the Oracle Machine network.

The total reward generated by a staking pool depends on the total token amount staked in the pool (including the stake of the issuer and stakers). As the total stake amount increases, the reward amount will also increase correspondingly until it reaches a limit called the stake limit. Issuers can increase their stake limit by supporting more symbols. In turn, stakers can incentivize issuers to support more symbols by choosing to stake more with the issuers who support more important symbols to the ecosystem. The rewards will be automatically distributed between the issuer and stakers, first to the issuer, and the remaining portion will be allocated to the stakers.

Pyth DAO has set the annual maximum reward rate for the staking pool to strike a balance between sustainability and effective participation. The current reward rate is 10%, but it can be adjusted by Pyth DAO. The maximum reward rate will be reached when the total stake in the staking pool is below the stake cap. However, the total reward amount cannot exceed the maximum reward rate multiplied by the stake cap; this means that if it exceeds the stake cap, stakers will receive a lower reward rate.

This arrangement incentivizes stakeholders to carefully evaluate the complete list of all publishers in the network when deciding which publisher to stake in order to help protect the Oracle Machine network. To learn more about the reward calculation, please refer to the relevant document.

In summary, the rewards for Oracle Integrity Staking are determined by multiple key factors, which can be adjusted by Pyth DAO:

Stake Limit: This is the maximum number of Tokens that can be staked by the issuer (including the issuer itself and additional stakers) and qualify for rewards. A higher stake limit allows the issuer to attract more stakers and increase the nominal rewards of the staking pool.
The number of supported symbols by the issuer: The issuer can support more symbols to increase its stake limit, thereby obtaining higher potential rewards. These additional rewards compensate for the increased risk of holding more symbols.
Highest Reward Rate: DAO sets the maximum reward rate that can be obtained in the staking pool, calculated in Annual Percentage Rate (APY). While a higher maximum reward rate can increase the potential total earnings for participants, DAO needs to carefully manage this parameter to maintain a balance between incentivizing participation and ensuring the long-term sustainability of Oracle Integrity Staking and Pyth Network.
Commission: The publisher charges stakers in the staking pool a fixed percentage of the reward (currently 20%) as a commission, which is the net reward after deducting any slashing amount. DAO can vote to adjust this fee rate and structure.
Reduction Mechanism: If the data provided by a group of publishers does not meet the standards, both the publishers and the stakers who support them may face reduction penalties. This shared responsibility model encourages stakers to carefully evaluate publishers and promotes a culture of accountability throughout the network. Currently, the upper limit of the reduction mechanism is 5% of the total staked amount, and this ratio can be adjusted by the Pyth DAO. The DAO can also vote on how the reduced tokens should be used, including whether to allocate them to affected users or for other purposes supporting the Pyth Network.

How do stakers participate?

PYTH stakers play a crucial role in Oracle Integrity Staking by enhancing the security and data integrity of the Oracle Machine through staking Tokens to the publisher.

To get started, anyone holding unlocked PYTH Tokens can access the Pyth Staking Dashboard and navigate to the Oracle Integrity Staking program. Eligible participants* can start exploring the list of publishers and choose the ones they wish to support, helping to ensure the security of the Oracle Machine network.

Stakers can rank and evaluate publishers based on pool composition, publisher quality ranking, the number of price Oracle Machines supported by the publisher, or other criteria that are most important to them. Once ready, stakers can stake Tokens in the staking pool of any publisher. These Tokens will enter a warm-up period before being officially staked and helping to ensure the integrity of the Oracle Machine. Stakers can manage their stake allocation among different publishers based on personal preferences and strategies for maintaining the integrity of the Oracle Machine network.

PYTH holders who have staked Tokens to Pyth governance will see these Tokens in the Oracle Integrity Staking program and can directly stake them to the issuer without having to withdraw them to their Wallet first.

Finally, participants can simultaneously stake the same Token to the Oracle Integrity Staking plan and the Pyth governance plan, ensuring the security of the Oracle Machine and obtaining the voting rights for Pyth improvement proposals. Participants can also choose to only stake in the Pyth governance without participating in the Oracle Integrity Staking.

Pyth DAO plays the role

Pyth DAO is responsible for determining and managing the parameters of Oracle Integrity Staking, such as stake limit, delegation fee, reduction amount, etc. These parameters ensure that the incentive mechanism remains consistent with maintaining high data standards. The current parameter settings can be found in the documentation.

Pyth DAO is also responsible for overseeing the important updates of stake and slashing mechanisms, such as determining the sources of rewards for issuers and stakers. To kickstart this initiative, the Pyth Data Association has allocated 1 billion unlocked Tokens. Pyth DAO can vote to decide on additional sources of rewards, such as on-chain income generated by the Pyth Oracle Machine.

In addition, Pyth DAO can also vote on how to handle Tokens that have been reduced due to the provider's provision of incorrect data. Although the reduced Tokens will automatically return to the DAO treasury, Pyth DAO can allocate these Tokens to the affected parties due to data errors or for other purposes allowed by DAO governance through voting.

DAO can also change the reward structure, such as incorporating other digital asset as rewards, allowing broader stake participation, thereby further enhancing the security and coverage of Oracle Machine.

Through these responsibilities, Pyth DAO empowers the community to shape the future of Oracle Integrity Staking, ensuring the continued resilience and scalability of the Pyth Network.

Price Oracle Machine V3 and Future Development

In Decentralized Finance (DeFi), the reliability and accuracy of Oracle Machine data are crucial. As more funds flow into the blockchain ecosystem, the risk of inaccurate or manipulated data is also increasing.

While the existing reliability measures for Pyth's price Oracle Machine are crucial for maintaining the current Decentralized Finance, the evolving Decentralized Finance requires more advanced security mechanisms. Therefore, using cryptographic economics to secure price data is the logical next step for the price Oracle Machine.

Pyth Network first launched the Price Oracle Machine V1 on Solana, providing high-frequency on-chain data from primary sources. With Solana's high speed, Pyth sets a new standard for reliable data delivery. With the launch of Price Oracle Machine V2, Pyth becomes the first pull-based Oracle Machine, expanding its influence to multiple blockchain ecosystems such as EVM, Move, Cosmos, and BTC, providing developers with high-quality, low-latency price data on any on-chain.

Oracle Integrity Staking unlocked the price Oracle Machine V3, which is a major improvement of the Pyth price Oracle Machine, introducing accountability mechanisms for each data source. The core component of V3 is enabled through Oracle Integrity Staking, allowing Web3 developers to build without fear of inaccurate data or malicious tampering.

Oracle Integrity Staking introduces a new paradigm in the field of Oracle Machine, which proactively prioritizes the responsibility of data sources and the protection of the entire data Supply Chain, setting higher industry standards for price Oracle Machine.

So far, Pyth Network is the only data infrastructure solution that provides this level of data accountability and security, covering all of its existing Oracle Machines, from the most commonly used price Oracle Machines to long-tail assets with low liquidity. The integrity stake of the Oracle Machine ensures that every price Oracle Machine is secure, every user is protected, and every publisher is responsible.

Pyth Network is redefining the future of Decentralized Finance. No matter which ecosystem you come from or how you choose to contribute, you are welcome to join this journey of change and create history together.

Statement:

This article is reproduced from[Medium], the copyright belongs to the original author [Penny Lu]. If you have any objections to the reprint, please contact the Gate Learn team, and the team will handle it as soon as possible according to the relevant process.
Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
Other language versions of the article are translated by the Gate Learn team. Without mentioning Gate.io, it is forbidden to copy, disseminate or plagiarize the translated article.