Oracle War, why is Flare underrated?

The Oracle Protocol acts as an intermediary between decentralized networks and external data sources, connecting on-chain and off-chain data in a secure and scalable way. This includes Web APIs, databases, connected device sensors, real-time data feeds, and even other blockchain networks. As blockchain applications become more complex, this off-chain data becomes increasingly important for the development of new use cases (such as the recently popular “machine learning”).

This article will take an in-depth look at three key oracle protocols, Chainlink, Pyth and Flare. Although Chainlink currently leads the market, it has limitations in latency and high throughput; while Pyth focuses on financial institutions and lacks in universality. Of note is the “dark horse” oracle protocol Flare, which combines features comparable to Chainlink and Pyth with fully sovereign L1, making it a unique (and probably underrated) protocol. Here’s an in-depth look at each protocol and insights into what’s been dubbed the “War of the Oracles.”

LINK

Chainlink is synonymous with oracles and is the undisputed market leader. Its powerful decentralized node network makes Chainlink the first choice for many dApp, DEX and DeFi platforms. Chainlink’s reliability and growing list of partners make it the first choice for institutions and emerging projects. Chainlink’s decentralized oracle network operates through a unique consensus mechanism, utilizing multiple nodes to obtain and verify real-world data. This multi-party approach ensures transparency and minimizes the risk of manipulation. However, while the oracle network itself is decentralized, analysts point out that Chainlink’s multisig maintains a high degree of control over the protocol price feed. In order to ensure data accuracy and tamper-proofness, Chainlink uses economic incentives to coordinate the interests of node operators and users.

As of May 2024, Chainlink has integrated more than 500 DEX and more than 800 DeFi platforms. Its oracles provide price information for over 5,000 trading pairs, with update times ranging from minutes to hours depending on the chain and asset. Chainlink heartbeats are refreshed regularly, or when the price deviates beyond a specified range (such as 1%).

Chainlink oracles currently have over $20 billion in value across different data sources and services. LINK tokens are used for staking and reputation within the Chainlink network and have a market cap of over $7 billion. According to Coingecko data, Chainlink tokens account for more than 70% of the market value of all oracles. Overall, demand for Chainlink’s oracle services adds value to token holders, as LINK pays node operators for the service.

Total guaranteed value of the oracleTVS, mostly used to summarize the overall economic impact and adoption of the oracle network Condition. Source: DefiLlama

It is worth noting that the pattern of the oracle market is not static, and competitors are constantly grabbing this piece of cake.

PYTH

Pyth is a new oracle protocol focused on financial use cases, using over 90 TradFi and crypto financial institutions as data providers (considered directly from the source Price data for stocks, commodities and currencies). Pyth's innovation has three aspects:

1. Quantifying Uncertainty: Introducing confidence intervals in its reported prices, this feature allows users to measure not only prices, but also the degree of uncertainty about prices, which is extremely valuable in volatile markets.
2. Multiple chains: Pyth’s data sources can be used in applications on almost any chain. Pyth Network initially launched on Solana and its own Pythnet (a fork of the Solana codebase), providing solutions for non-Solana chains through integrations such as Wormhole.
3. Efficient price updates: Another innovation introduced by Pyth Network is the Pull Oracle architecture. Unlike the inefficient Push Oracle common in traditional systems, this architecture achieves the efficient, on-demand price updates required by data users. Price updates.

Pyth's price refresh rate is typically between 300 and 500 milliseconds, which is orders of magnitude faster than some competing services, or better able to meet the needs of modern finance (such as dex). This speed is due to Pyth’s trust model, which relies directly on a few large data providers rather than decentralized nodes to provide price information. Pyth's trust model is not the only module that is less decentralized. Pyth's reliance on centralized entities such as Wormhole has made it vulnerable to outages in the past. Pyth is also working on implementing staking requirements for data providers to incentivize accurate price feeds.

Nevertheless, Pyth’s TVS has surged from $500 million to more than $4 billion in the past six months, driven by the lending agreement. Pyth's collaboration with Solana has been very successful, combining fast data processing with Solana's high-throughput infrastructure. Following a successful airdrop last November, Pyth plans to make a new round of Pyth tokens worth $100 million available to its more than 160 integrated dapp partners.

While Pyth has been successful in its specific market, it has not yet proven to scale beyond finance to a wider range of use cases.

FLR

Flare is an emerging competitor in the oracle space, taking a different approach than Chainlink, Pyth, and other competitors. In other words, Flare is not just an oracle network, but also has computing power - the EVM smart contract. Flare combines a smart contract platform with an oracle system. The validators responsible for network consensus and block generation are also responsible for transmitting data to the network. That is, validators need to successfully provide accurate data to the network in order to receive verification rewards. Google Cloud recently joined Flare as a validator and contributor, along with companies like Figment and Ankr.

Data connectors and the Flare Time Series Oracle (FTSO) are the core of the Flare system:

• Data connectors: bring in state data from other blockchains and web services On the Flare blockchain, such as transaction information.
• FTSO: Transfer time series data of multiple chains to Flare. (Ongoing upgrades will eventually enable up to 1000 data sources, and 1-2 block updates every 90 seconds)

This unique combination sets Flare apart, data feeds And Proof is free for dapps running directly on Flare (Flare charges for data elsewhere).

All in all, Flare is probably underrated.

Chainlink has a considerable first-mover advantage, and countless projects have already integrated with it. However, as Flare gains more and more attention, it has the potential to quickly catch up with Chainlink. To better illustrate the potential of FLR, here is the FDV as of May 1, 2024:

• FLR: $2.9 billion
• PYTH: $5 billion
• LINK: US$12.7 billion

If you consider the following background, the above comparison may be quite different:

• Flare’s project integration count is less than 10% of Chainlink’s and is just getting started
• FLR’s token economics incentivize active participation from stakeholders and holders
• Flare Providing both data and computing services makes it very different from existing oracle protocols - in addition to being able to generate fees from data services, you can also build your own native ecosystem

Development of Flare It's still early days, but assuming the development path can be realized - here is the upside potential of FLR under different scenarios:

• Flat with PYTH: ~1.7x
• Half of LINK: ~2.27 Times
• Median value of PYTH and LINK: about 3.17 times
• 75% of LINK: about 3.3 times

Those that not only meet current market demand, but also Projects that address next-generation challenges will win the oracle war. While Chainlink is the market leader, latency and suitability for high-throughput use cases leave a lot to be desired. On the other hand, Pyth's focus on financial institutions brings a unique dimension to the oracle space, but leaves many gaps in terms of generalizability across use cases. Flare combines the above characteristics with those of L1, and its unique market positioning deserves attention. The winner of this war will be the protocol that can provide reliable and up-to-date data, create strong network effects, and adapt to the changing needs of the DeFi ecosystem (including emerging ecosystems such as artificial intelligence, which involve processing large and diverse data sets). While it’s too early to draw conclusions, FLR appears to be undervalued compared to its peers.

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