Pyth Network is redefining the future of DeFi.

Pyth Network is committed to providing a powerful boost to DeFi and bridging the gap between traditional finance and on-chain finance. In 2021, the launch of Pyth Price Oracle marks a critical first step in this mission. As DeFi continues to develop, the needs of developers and users continue to evolve. Smart contract developers and market participants are increasingly demanding greater security and reliability in Web3 capital markets.

Oracle Integrity Staking (OIS) — is the latest iteration of the Pyth price oracle, introducing a more robust data source accountability mechanism, creating a more secure DeFi ecosystem through decentralized staking rewards and penalty mechanisms for network participants.

• Pyth data publishers (data providers) - will be able to systematically receive rewards from the Pyth protocol for ensuring the quality of price data. If the wrong data they provide has a negative impact on the protocol, their stake will be slashed. The Pyth DAO can vote on how to deal with this part of the slashed funds, such as distributing it to affected users or other uses.

• PYTH stakers can delegate their staked tokens to PYTH data publishers to increase the potential rewards for data publishers to provide high-quality data. This move will help strengthen the resilience and security of the Pyth price oracle; in return, PYTH stakers will also automatically receive rewards by protecting the oracle network and the DeFi ecosystem.

Oracle Security Staking (OIS) covers all 500+ Pyth price feeds, setting a higher standard for oracle technology and market participants to integrate into the DeFi ecosystem. This launch is an important milestone in Pyth Network's mission to provide reliable and accurate price data for all blockchains, while also meeting the growing demand for decentralization and sustainable development.

This article will take a deep dive into how Oracle Security Staking (OIS) allows developers to build applications with confidence through enhanced data accountability and price oracle security.

The revolution that Oracle Security Staking (OIS) brings to developers

The most pressing challenge in the oracle space today is how to provide developers with high-quality and reliable price data for all the assets they need across all blockchains in a trustless manner.

Currently, the data infrastructure available to developers does not yet provide comprehensive accountability measures to ensure the quality of data. Existing oracles can only use a simple on-chain incentive mechanism to ensure quality for a few relatively safe markets.

Expanding asset coverage is also a complex challenge for push model oracles. Pyth pull model oracles have established a new paradigm for how to quickly scale price feeds to new blockchains, while also enabling applications using Pyth to earn rewards for accessing new, trending or strategic assets, even if they are not yet widely recognized.

Oracle Security Staking (OIS) directly addresses issues of data quality and scalability by holding Pyth data publishers accountable for price accuracy and coverage of assets.

Price Accuracy

Data publishers must stake PYTH tokens to be eligible for on-chain data publishing rewards, and can only receive mechanism rewards if they provide high-fidelity price data.

On the contrary, if the data publisher provides wrong or malicious data, part of the staked tokens will be cut as a penalty. In addition, Pyth DAO can vote on how to deal with the cut funds, including paying this part of the funds to affected users, or using this part of the funds in other ways to support other purposes of the development of Pyth Network.

For developers, these results mean greater trust in data, without having to worry about the quality and security of the data. These safeguards complement the existing reliability practices of Pyth price oracles, including on-chain aggregation mechanisms to exclude the impact of abnormal data and consistency testing of newly launched asset feeds.

Asset coverage

Oracle Security Staking (OIS) also allows data publishers to increase their potential rewards by increasing the number of price feeds they support. Additionally, if data publishers start publishing unique price feeds, their potential rewards will increase.

This incentive structure makes Pyth the oracle of choice for smart contract developers building a wide range of applications; no matter where teams choose to build, no matter what asset type data they need, the Pyth price oracle can scale to cover those needs.

Protecting the DeFi We Love

The Pyth community also plays a vital role in Oracle Security Staking (OIS), where PYTH stakers can now be rewarded programmatically for contributing to the security of the oracle network. By staking tokens to Pyth data publishers, the potential returns for selected publishers are enhanced, while also strengthening the resilience and accuracy of Pyth price feeds. The staking reward mechanism first rewards publishers based on data quality, and then rewards stakers based on their contribution to the network.

This mechanism provides a unique way for stakers to guide data publishers to support more price feeds and asset types, in addition to maintaining a high standard for price feed data. It is worth noting that the reward and slashing mechanism of Oracle Security Staking (OIS) affects both data publishers and their stakers. Publishers are responsible for the data they provide to oracles, and stakers can help strengthen the oracle network by choosing which data publishers to support.

How Oracle Security Staking (OIS) Works

Oracle Security Staking (OIS) allows anyone to participate in securing Pyth and protecting the DeFi ecosystem. The program introduces a decentralized staking reward and slashing mechanism to incentivize publishers and PYTH token holders to strengthen the quality of the oracle by staking tokens.

Staking Rewards and Slashing Process

At the heart of Oracle Security Staking (OIS) are staking pools, each corresponding to a different data publisher. Each participating publisher can stake their own PYTH tokens to receive data rewards for the data they publish. PYTH stakers - members of the Pyth community can choose the publishers they wish to support and can stake PYTH tokens in any publisher's pool to help secure the oracle network.

The total amount of rewards generated by the staking pool is determined by the total number of tokens staked in the staking pool (determined by data publishers and stakers). As the total amount of staked increases, the reward amount will also increase accordingly until the staking cap is reached. Data publishers can increase their staking cap by supporting more price feeds. Conversely, stakers can incentivize publishers to list more price feeds by choosing to stake more publishers of price feeds that are important to the ecosystem. Rewards will be automatically distributed between publishers and stakers, with rewards going to publishers first and the remainder going to stakers.

Pyth DAO sets a maximum reward rate for the staking pool to strike a balance between sustainability and effective participation. This rate is currently 10%, but can be adjusted by Pyth DAO vote. When the total stake in the staking pool is below the staking cap, stakers can receive the maximum reward rate. But the total reward can never exceed the maximum reward rate multiplied by the staking cap; this means that if the staking cap is exceeded, stakers will receive a lower reward rate.

This arrangement incentivizes stakers to carefully evaluate the full list of all publishers in the network when deciding which publisher to stake with, in order to help secure the oracle network. The detailed reward calculation method can be viewed in the developer documentation.

In summary, Oracle Security Staking (OIS) rewards are determined based on multiple key factors, all of which can be adjusted by Pyth DAO voting.

• Staking Cap: This is the maximum amount of tokens that can be staked with a publisher (including the publisher itself and additional stakers) and be eligible for rewards. A higher staking cap allows publishers to attract more stakers and increase the nominal rewards for the staking pool.

• Number of symbols supported by the publisher: Publishers can support more symbols to increase their staking cap, thereby receiving higher potential rewards. These additional rewards are compensation for taking on the slashing risk that comes with more symbols.

• Maximum Reward Rate: The DAO sets a maximum reward rate that can be earned in the staking pool, calculated as an annualized percentage yield (APY). While a higher maximum reward rate can increase the total earning potential for participants, the 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 the Pyth Network.

• Delegation Fee: Issuers charge stakers in the staking pool a fixed percentage of their rewards (currently 20%) as a delegation fee, which is the net reward after deducting any slashing amounts. The DAO can vote to adjust this rate and structure.

• Slashing 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 slashing penalties. This shared responsibility model encourages stakers to carefully evaluate publishers and promote a culture of responsibility across the network. Currently, the slashing mechanism is capped at 5% of the total stake, which can be adjusted by the Pyth DAO. The DAO can also vote on how to use the slashed tokens, including whether to distribute them to users affected by the error or for other purposes to support the Pyth Network.

How Stakers Can Get Involved

PYTH stakers play a vital role in Oracle Integrity Staking, enhancing the security and data integrity of the oracle by staking tokens to issuers.

To begin participating, anyone holding unlocked PYTH tokens can visit the Pyth Staking Dashboard and navigate to the Oracle Integrity Staking Program. Eligible participants* can begin exploring the list of publishers and select the ones they wish to support and help secure the oracle network.

Stakers can sort and evaluate publishers based on pool composition, publisher quality ranking, the number of price oracles supported by publishers, or other criteria that are most important to them. When ready, stakers can stake tokens into any publisher's staking pool. These tokens will enter a cooldown period before they are officially staked and help secure oracles. Stakers can manage their stake allocation across different publishers based on their personal preferences and strategies for maintaining the integrity of the oracle network.

PYTH holders who have staked tokens to Pyth Governance will see those tokens in the Oracle Integrity Staking Program and can stake them directly to issuers without having to withdraw them back to their wallet first.

Finally, participants can stake the same tokens to both the Oracle Integrity Staking program and the Pyth Governance program, ensuring the security of the oracle while gaining voting rights on Pyth improvement proposals. Participants can also choose to stake only to Pyth Governance without participating in Oracle Integrity Staking.

The role of Python DAO

The Pyth DAO is responsible for determining the parameters that govern Oracle Integrity Staking, such as staking caps, delegation fees, reduction amounts, etc. These parameters ensure that incentives are aligned with maintaining high data standards. The current parameter settings can be found in the documentation.

The Pyth DAO is also responsible for overseeing important updates to the staking and slashing mechanisms, such as determining the sources of rewards for publishers and stakers. To kick off this initiative, the Pyth Data Association has allocated 100 million unlocked tokens. The Pyth DAO can vote on additional sources of rewards, such as on-chain revenue generated by the Pyth oracle.

Additionally, the Pyth DAO can vote on what to do with tokens that have been slashed due to publishers providing incorrect data. Although slashed tokens are automatically returned to the DAO treasury, the Pyth DAO can vote to allocate these tokens to parties affected by the data error, or for other uses permitted by DAO governance.

The DAO could also change the reward structure, such as to include other digital assets as rewards, allowing for broader staking participation, further enhancing the security and coverage of the oracle.

Through these responsibilities, the 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 V3 and Future Development

In decentralized finance (DeFi), the reliability and accuracy of oracle data is crucial. As more money flows into the blockchain ecosystem, the risk of inaccurate or manipulated data increases.

While the existing reliability measures of the Pyth price oracle are essential to maintaining the current DeFi, the evolving DeFi requires more advanced security mechanisms. Therefore, using cryptoeconomics to secure price data is the logical next step for price oracles.

Pyth Network first launched price oracle V1 on Solana, the first to provide high-frequency on-chain data from first-party sources. With Solana's high speed, Python sets a new standard for reliable data delivery. With the launch of price oracle V2, Pyth has become the first pull oracle, extending its influence to multiple blockchain ecosystems such as EVM, Move, Cosmos and Bitcoin, providing developers with services on any chain. High-quality, low-latency price data.

Oracle Integrity Staking unlocks Price Oracle V3, a major advancement in Python price oracles that introduces accountability for each data source. A core component of V3 is that Oracle Integrity Staking enables Web3 developers to build with confidence without having to worry about inaccurate or malicious data manipulation.

Oracle Integrity Staking introduces a new paradigm in the oracle space that proactively prioritizes accountability for data sources and protection of the entire data supply chain, setting a higher industry standard for price oracles.

To date, Pyth Network is the only data infrastructure solution that provides this level of data accountability and security across all of its existing oracles, from the most commonly used price oracles to long-tail assets with low liquidity. Oracle integrity pledges ensure that every price oracle is secure, every user is protected, and every publisher is accountable.

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