Galaxy Digital, a digital asset merchant bank, announced today that it has partnered with Pyth Network to act as an oracle, providing data to its DeFi traders.
An oracle serves as a data connector between real-world data and the blockchain. It’s the layer that, among other things, searches and verifies external data sources for smart contracts, pricing, transactions, and payment verification.
Given the explosive growth of DeFi over the last few years, oracles have piqued the interest of many institutions that are normally in the data provision business, such as telecom service providers like Swisscom, which recently became a node operator for Chainlink, one of the world’s largest oracles.
Pyth describes itself as a “oracle solution for latency-sensitive financial data that is typically kept behind the ‘walled gardens’ of centralized institutions,” and it went live on the Solana blockchain in late August with funding from Solana Labs. Some of the most well-known names in crypto and finance, such as FTX, Coinshares, and DRW Cumberland, are also contributing to the Pyth network.
According to Galaxy’s James Roth, this partnership will include Galaxy providing bitcoin prices to the Pyth Network on a sub-second timescale. Galaxy is the newest addition to a list of more than 20 companies that provide data to Pyth.
‘It’s better to be early than late.’
LMAX Group, a leading operator of execution venues for FX and cryptocurrency trading, was the first major institutional exchange to join the Pyth network in June 2021.
“The key to market data is speed and reliability — there’s an old adage in market data that says, ‘better never than late,’” said Mercer. “In Ethereum, a block takes 10 to 15 seconds to complete, whereas in Solana, you’re talking about being able to update prices several times per second. The Solana blockchain is the obvious place for Pyth to be when it comes to solving market data problems.”
“We’re in it because it’s the only way for a centralized exchange like LMAX Digital to contribute to this fascinating world of decentralized finance,” Mercer continued. Pyth, we believe, has the potential to be a decentralized oracle for market data.”
One of the main goals of Pyth’s approach is to reduce reliance on individual data sources by providing reliable and low-latency data feeds. This kind of speed isn’t usually associated with decentralized ledger technology, which replicates state (transaction records) across multiple nodes. Solana tries to maximize speed at the expense of decentralization by processing transactions across a validator set an order of magnitude smaller than Ethereum’s.
Increasing market share
Although this type of blockchain-based financial application is still in its early stages, Galaxy’s Roth does not consider the project to be experimental.
“We’re happy to try a lot of different things, but that’s not what I’d call this. During the Mainnet conference, Roth told Blockworks, “I would call this something that we see as part of the core infrastructure of DeFi more broadly.” “Anything that necessitates the input of a highly reliable price…not just crypto, but traditional equity as well.”
According to Roth, Galaxy believes that being able to create “high fidelity, high quality, and trustworthy data” that sits on the blockchain and powers decentralized applications offers a massive value creation opportunity. After all, there are a plethora of data providers out there, but even some well-known names have previously admitted to data integrity issues. This will be unacceptable to institutional investors looking to invest billions in the market.
“We’ve wanted to be a part of it for a long time,” Roth said.
Pyth is a product of the Solana ecosystem, but future plans include support for Ethereum, Binance Smart Chain, and Terra, all of which currently use their own oracles. The reliability of data from these oracles is critical for DeFi’s long-term health and growth, as other experts in the field, such as Chainlink’s Sergey Nazarov, have stressed.
“Because we are one of the founding/early contributors [to Pyth], we believe it will be hugely influential and transitional,” Mercer said, “but look, the business that we’re in is foreign exchange and cryptocurrencies — we trade $30 billion a day — market data and efficient price data are key.” That is the value that all of our participants seek.”