Pythiad #3 — Pyth Laboured in September

Welcome to the third installment of the Pythiad!

For those who missed Pythiad #1 & Pythiad #2, be sure to check them outon our Medium page. We covered just about the entire history of Pyth, from our ‘hello world’ moment to our various partners, including the impressive growth of our data providers and partner projects utilizing the Pyth feeds.

To our followers, we say thank you again for all your support, feedback, and positivity! And to our newcomers, we say welcome.

We are delighted to have you on board. As always, there is much to discuss.

Coming up

  • Pyth Laboured
  • Solana and Beyond
  • Our Publishers
  • Upcoming Projects
  • The Pythian Community

Pyth Laboured

Since the last release of the Pythiad newsletter, a lot has happened. We are committed to keeping all Pythians in the loop on Pyth network’s developments. We’re kicking off issue #3 with coverage on everything that’s occurred in the month of September.

Pyth to Solana Mainnet!

We did it in less than 140 days. That’s right: 140 days after our Hello World moment in April 2021, the Pyth network finally made its 1st party data — directly sourced from some of the biggest players in the financial world — open to all the Solana mainnet in August 2021. Builders on the Solana blockchain (and soon, other chains) looking to create the next generation of financial services dApps will want to read the Pyth docs to get started and join the Discord to ask any questions or discuss.

For more details, check out the Pyth mainnet blog post here.

New feeds in the Pyth network

The crypto world never sleeps, and new tokens appear every day across the vast expanse of permissionless markets. Pyth network is designed for sourcing only first-party data for multiple reasons relating to quality, speed of access, and legal factors. This means that there may be hurdles to immediately listing some of the newer and shinier tokens as price feeds, as reliable sources need to be secured. The team continues to work on getting those “long tail” data sources up and running, and we thank everyone again for their patience.

Nevertheless, within the month of September, a total of 15 markets have been added to the network:

  1. AUD/USD (FX)
  2. COPE/USD (Crypto)
  3. HXRO/USD (Crypto)
  4. MIR/USD (Crypto)
  5. MNGO/USD (Crypto)
  6. NZD/USD (FX)
  7. RAY/USD (Crypto)
  8. SNY/USD (Crypto)
  9. USD/CAD (FX)
  10. USD/CHF (FX)
  11. USD/CNH (FX)
  12. USD/HKD (FX)
  13. USD/MXN (FX)
  14. USD/ZAR (FX)
  15. USD/ZAR (FX)

To review all of our available price feeds, have a look at our markets page. We welcome all feedback and requests regarding the next set of instruments and asset classes — the world of data is big, and we are just getting started here at Pyth!

Website Wonders

REMINDER: Market data shown on the website for devnet and testnet price feeds are sourced from the Solana testnet and devnet. As the name suggests, testnet and devnet are for data providers testing and should be seen as a demonstration only — prices may not reflect real-world data.

  • Have you checked out the Markets page since the last Pythiad?

Following our go-live on mainnet, you may now check out the price feeds now provided by the Pyth network on Solana mainnet which are directly usable by any protocol.

  • Having a hard time following all our new 1st party data providers?

Fear no more, as we now have a brand new section “Publishers”, which lists all of our wonderful participants of the Pyth network. Be sure to check this regularly, as the network will continue to grow extensively and at the same rapid pace!

Root Cause Analysis of September 20th, 2021

Between 12:21 and 12:23 UTC on Monday, Sep. 20, 2021, the Pyth BTC/USD aggregate price had several sharp dips below $40,000, reaching as low as $5,402, and the confidence intervals became extremely wide. Below is a graph of the Pyth BTC/USD price series for the time period in question, plus two minutes on either side.

Several Solana programs relying on Pyth prices were impacted by this incident. The impact was exacerbated due to some programs relying on the aggregate price feed without using the confidence, which allowed liquidations to occur even though the published price was highly uncertain.

What happened? To summarize the post-mortem report:

The issue was caused by the combination of (1) two different Pyth publishers publishing a near-zero price for BTC/USD and (2) the aggregation logic overweighting these publishers’ contributions.

Pyth core developers are taking several steps to prevent these issues from happening again:

  • Software changes to reduce the probability that publishers produce incorrect prices due to software errors, including developing a suggested integration testing protocol that publishers can run to validate their software changes.
  • Adjustment of the aggregation logic to properly weight prices that span a large range of values. The new aggregation logic will derive its weights from relative price differences, which will prevent the naturally smaller confidence intervals of lower prices from overly affecting the aggregate.
  • Enhanced documentation, best practices, and example code for protocols integrating with Pyth focusing on the importance of utilizing both the price and confidence interval as the best way to accurately reflect the market.

You may review the full root cause analysis here.

This event only fueled our motivation to continue onboarding the strongest first-party data providers and building the most robust oracle available. What does not kill you makes you stronger, and the lessons from this incident will only reinforce Pyth in its mission.

Best practices

The error experienced for 2 minutes on the Pyth BTC/USD feed also highlighted a need to further explain and support protocols to implement the Pyth confidence interval in their programs and efficiently battle when markets actually experience high volatility.

In a previous blog post, we introduced what was confidence (or uncertainty) in a price — you can read it here.

On Monday, Sep. 20, 2021, a particular BTC/USD slot reached as low as $5,402 with a confidence interval of over $21K. From a human perspective, when querying the price of something, if your source of knowledge would provide you a price with a potential error margin of 4x its price, it would be natural to be careful and doubt this initial valuation.

Pyth represents these possibly different prices by giving its users a probability distribution over price instead of just a single price. The price of the product is drawn from a normal distribution centered on the Pyth price with a standard deviation equal to the confidence interval. If markets are behaving normally, then the confidence interval will be tight — typically much less than 1% of the price — and the normal distribution will be highly peaked. However, at unusual times, the confidence interval can widen out dramatically.

As our first action, we released earlier this week, a “best practice” guide in the Pyth network docs section — developers as well non-developers should take some time to read as this is a great primer on what we expect from the confidence value returned by the protocol.

Any questions? Come ask in our socials (all linked at the end of this blog).

Solana and Beyond

Solana Ignition Hackathon

Pyth has been running since April this year and we are now sponsoring our second Solana Hackathon. After the Solana Season Hackathon in May, here we are again. We’re excited to see the results of everyone’s hard work once the Solana Ignition Hackathon concludes on October 15th!

During the first hackathon, Pyth was only available on Solana devnet, and the website was unveiled for that occasion! To inspire the participating protocols at that time, Pyth sponsored a prize track of $25K (won by the Solfarm.io team). If you want to jump back in time, you may review our Pythiad #1 or Twitter thread in which we highlight all the builders from this hackathon.

Another Pyth prize is up for grabs for Ignition. This time, $30K will be awarded to the best integration using Pyth network’s HiFi price feeds. Even if you only started building on Solana testnet or devnet for the hackathon, leveraging Pyth network will enable you to launch your protocol as soon as you want on Solana mainnet too. We look forward to everyone’s submissions!

We also look forward to seeing some of you during Solana Breakpoint in Lisbon from November 7–10th.

Solana outage

“On September 14th, the Solana network was offline for 17 hours. No funds were lost, and the network returned to full functionality in under 24 hours. Solana is designed for adversarial conditions. Over the years the community has developed robust tools and processes for trustless recovery and has had several practice runs. The cause of the network stall was, in effect, a denial of service attack. At 12:00 UTC, Grape Protocol launched their IDO on Raydium, and bots generated transactions that flooded the network. These transactions created a memory overflow, which caused many validators to crash forcing the network to slow down and eventually stall. The network went offline when the validator network could not come to an agreement on the current state of the blockchain, which prevented the network from confirming new blocks.”

You may read here the initial Network Outage Overview from the Solana Foundation here.

The Solana community will release a more detailed technical post-mortem. The outage impacted Pyth Network, as Pyth is directly built upon the Solana blockchain, and the network relies on Solana to work effectively and produce its final price feeds.

In this occurrence, the outage of the Solana blockchain was not detrimental to any other Solana projects given that the whole chain was inoperative.

However, as the Wormhole gets completed and enables all kinds of message types (i.e. oracle data) to be sent cross-chain (in Pyth’s case, from Solana to any chain the Wormhole can connect to), such event would have had a negative impact on non-Solana projects leveraging the Pyth network.

Pyth was aware of this prerequisite while the network was conceived of and built out. We remain totally confident that such an event will not happen again in the future, as measures and improvements will be taken by the Solana community. We were also impressed by Solana’s “coordinated effort by the community, not only in creating a patch but in getting 80% of the network to come to a consensus. There’s a big difference between an outage like this happening on a centralized network (like Amazon Web Services) and a decentralized network like Solana. If AWS crashes, users have to trust Amazon to bring it back to the right state. The credit and obligation for restoring network operations on any blockchain are in the hands of the community. Operators across the world worked together to reach a solution and restored functionality.”

We are bridging with Wormhole

A couple of weeks ago, Wormhole, the keystone component for bringing Pyth data to any chain, officially released its bridge between Ethereum to Solana, with support for NFT’s and ERC-20 tokens. This initiative will unlock many possibilities for asset transfers as the crypto world starts to embrace Layer-1 interoperability. The Wormhole will also integrate with other notable L1s such as Terra and BSC. The development for the bridge with Terra is nearing completion, and there should be another announcement coming from the team when the bridge is ready for mass adoption.

The purpose behind integrating Pyth with Wormhole’s capability of bridging L1s is to make Pyth’s oracle data available to all chains. First-party financial data is inaccessible to the majority of people: with this integration, projects will be able to utilize our data feeds, regardless of what chain they build on. We look forward to more projects outside of Solana to begin integrating with us.

Our Publishers

Why do 1st party data providers matter?

We have already touched on the importance of having high-quality and first-party data sources in our last two posts (substack #2 or Pythiad #2). A crypto selloff experienced on September 7th, 2021 brought renewed attention to our design choice.

Bitcoin and ether plummet 17% as broad sell-off batters crypto on the day El Salvador adopts bitcoin as legal tender (source Markets Insider, Sept 7)

Analysts point to overleveraged traders after Bitcoin flash crashes to $43K. Traders were hit hard as $3.5 billion in liquidations took place as Bitcoin price crashed below $43,000. (source CoinTelegraph, Sept 8)

In the history of crypto markets, a 17% selloff on its major coin (Bitcoin) is not such a rare event: during the “COVID crash” on the 14th March 2020, BTC quickly lost about 40% of its value in a one-day timeframe; and on the January 21st, 2021, 24 hours after breaking its ATH, Bitcoin plunged by 20%.

But more so than the “appropriate valuation” of an asset, the more interesting question for Pyth network (and our partner protocols) was to see how both our individual data publishers and the overall Pyth network was able (and also not able) to reflect a sharp price evolution in such a short time frame.

For comparison purposes, looking back at the spot price of BTC(/USD) on the top 10 worldwide crypto exchanges (which represents on average about 75% of the total volume traded), anyone had a few minutes to purchase one Bitcoin for approximately $43,000 (varying across exchange) on September 7th, 2021.

Compare the BTC/USD spot price graphs for FTX, Binance, and Bybit:

FTX BTC/USD
Binance BTC/USD
Bybit BTC/USD

Below is a snapshot of the Pyth network aggregated price feed for BTCUSD taken during the September 7th selloff. The lowest Pyth BTCUSD price aggregated and distributed to the Solana blockchain (and apps leveraging our feeds) was almost exactly similar to the drop experienced by all stakeholders that day: $43,000. Reviewing other oracles and data sources proves that not all price feeds were able to keep up with this volatility.

This demonstrates well that both our individual 1st party-data providers (more than a dozen were active that day on this specific feed, with exchanges and trading firms among them), as well as the Pyth aggregated price feed, managed to match this highly volatile market environment with a great level of accuracy.

This event strongly affirms our decision to onboard only 1st party data providers — which often, if not always, have the best and fastest access to market data, and are able to serve it to the Pyth network and (by extension) our feed recipients with a delay almost indistinguishable from real life. While third-party data may be perfectly sufficient for certain protocols, the aim of Pyth is to provide high fidelity reliable data from institutional grade sources in order to serve a more complex and sophisticated market.

New Providers

In just over a month, Pyth network has continued to welcome a significant number of high-performing data providers — some being worldwide actors in the traditional financial markets, and others as leaders of services within the crypto ecosystem.

A well-diversified set of partners enables Pyth to offer a wide set of markets (crypto, equities, FX, commodities) to users who otherwise would not have access to such HiFi data. Below is a summary of new participants who have joined the network since the last Pythiad. Be sure to check out our website for the full list.

Jane Street

  • Jane Street is a quantitative trading firm and liquidity provider widely regarded for its proprietary trading models and quantitative computing power that places them at the forefront of market structure in equities, bonds, options, and ETFs globally
  • Over 2020, Jane Street has traded more than $17 trillion worth of securities. Specifically, the firm accomplished $4 trillion in traded volume in Equities, while traded $3.9 trillion in volume for ETFs within the year (source: FT).
  • The company is active in over 5,000 ETFs worldwide and we continuously refine our quantitative models and cutting-edge technology to provide order-book liquidity in over 45 countries.

Susquehanna International Group

  • They are one of the leading members of the DeFi Alliance — a leading decentralized finance accelerator that aims to bring DeFi to a billion people by 2025
  • Susquehanna International Group is one of the largest traders of listed stock options in America and moves over 130 million shares daily across 50 countries
  • Susquehanna is also regularly among the top-five market makers in U.S. stocks traded by retail brokers.

Hudson River Trading

  • HRT was founded in 2002 and now employs more than 500 people around the world using a quantitative approach to problem-solving.
  • HRT is a recognized leader both for on-exchange and off-exchange trading which has led them to handle about 10% of the daily U.S. stock trading volume!

Bitstamp

  • Bitstamp is the world’s longest-running cryptocurrency exchange, supporting investors, traders, and leading financial institutions since 2011.
  • Bitstamp has consistently ranked in the top 10 spot markets in terms of volume for almost a decade and is now trusted by over 4 million customers.

DV Chain

  • DV Chain is an over the counter (OTC) trading platform offering deep liquidity and cutting-edge technology to institutional clients, professional traders, and exchanges
  • DV Chain is an affiliate of DV Trading, a Chicago-based proprietary trading firm, and also an affiliate of Independent Trading Group, a Canadian broker-dealer.
  • DV Chain provides 24/7 liquidity and market-making services to institutional clients and exchanges within the cryptocurrency ecosystem.

Amber Group

  • Amber Group is one of the world’s leading crypto finance service providers, operating 24/7 with a presence in Hong Kong, Taipei, Seoul, and Vancouver.
  • Founded in 2017, the Amber Group has over $1.5 billion in AUM.
  • Since Amber Group has cumulatively traded over $500 billion and is now integrated with 100+ exchanges and trading venues across the globe.

Galaxy Digital

  • Galaxy Digital Holdings Ltd. is a diversified financial services and investment management company in the digital asset, cryptocurrency, and blockchain technology sectors. Galaxy Digital (TSX: GLXY) is a public-listed company on the Toronto Stock Exchange
  • In partnership with Alerian and S-Network Global Indices, Galaxy Digital has recently launched 8 blockchain indexes for passive investors to access the emerging digital-assets ecosystem. Constituents include Facebook, Alphabet, Microsoft, Mastercard, Square, and Coinbase.
  • Galaxy Digital also partners with Invesco to offer a Bitcoin Exchange-Traded Fund (ETF) in the United States. The filing is still currently pending the SEC decision.

GMO Coin

  • GMO Coin was established in October 2016 as a crypto assets exchange business company and registered as a crypto assets exchange in July 2018.
  • GMO Coin is also registered as a Type I Japanese Financial Instruments Business since May 2020
  • GMO Coin has a total volume traded of about $500 million traded on a daily basis across its various assets — with all markets being traded are versus the Japanese Yen

We still look forward to welcoming many more reputable and high-quality data publishers to our network and co-build the next digital marketplace of institutional grade, high fidelity financial data.

Upcoming Projects

The Solana Hackathon will conclude in two weeks. Excitement is in the air! In this spirit, we will present 5 partner projects looking to release their protocols to mainnet relatively soon that should (and deserve to) catch your attention.

01 Protocol

01 is “one of the first protocols to officially launch an entirely new type of DeFi-native derivative product: everlasting options. Everlastings are options that never expire (∞) and that constantly readjusts its strike price so that traders can be exposed to options without the need to select a strike, select an expiry time, or manually roll over their funds at expiry.” You can read more here and go check out their devnet, which has been live for more than 2 weeks now

Drift Protocol is a decentralized exchange for perpetual futures on Solana. It features cross margined trading accounts and a virtual AMM (vAMM) for price discovery mechanism. In addition to a rebalancing vAMM, the main innovation of the protocol is high capacity cross margin trading across a large selection of markets (up to 1000). After a closed alpha devnet, the Drift team has just made its protocol open for everyone to use couple of days ago, be sure to try it out here.

Jet Protocol is an open-source, non-custodial, borrowing, and lending protocol built on the Solana Blockchain. Jet will innovate on battle-tested governance models from existing protocols, skewing towards community ownership and engagement. The most important aspect of this governance-first approach is to build an inclusive community to research, design, and implement useful lending products. We highly recommend you to go read their whitepaper as well as try their devnet that has been available since mid-September.

You probably heard from Solrise a few days ago about an exciting additional feature that they have been building with Serum and Civic separately from their decentralized fund manager platform. TL;DR Solrise DEX Pro is Solana’s first permissionless DEX that uses Civic Pass as the underlying identity technology to determine which participants meet rigorous standards for verification prior to allowing them to trade — this will enable to onboard the large capital allocators like institutional investors who have to meet stricter regulations. But back to the Solrise Core, the team has been building a simple, highly functional fund management protocol that can be adapted and expanded with further integrations to provide a universal solution for pooling funds under a manager on the Solana blockchain. After a successful devnet competition DAWN, more exciting arrives at their DAWN II competition arrives on mainnet on October 18th!

Synthetify is a synthetic assets platform that aims to provide a bridge between cryptocurrencies, stocks, fiat currencies, and other financial instruments directly from one decentralized exchange.

After a recent NFT drop to the community, some tease around Synthetify merch, and constant UI/UX improvements to the community navigating with ease on the platform, the Synthetify team has announced launching their mainnet next week! If you want to already try their devnet, this is here.

The Pythian Community

Inaugural Pyth event

Supported by our wonderful partners and hosted by Jump, Cumberland, LMAX, Hudson River Trading, and Jane Street, the Pyth community gathered for its inaugural event in New York City on the back of the Messari Mainnet conference.

It was truly amazing to see all of our amazing partners come together in person. The sizeable attendance was testimony to the energy and enthusiasm behind this growing project. The gathering further fueled our commitment to Pyth and our belief in the long-term impact Pyth will have on the industry for both data providers and consumers.

wen-token-#3

While no official announcement has been made so far on tokens, investment, and anything relating to such, we do understand our Pythians’ interest in learning the ins and outs of the project as well as to directly participate.

As soon as the project revealed itself to the public, the infamous ‘wen’ question flooded both the Pyth telegram and Discord (the latter having built a channel for catharsis: #wen-token).

Two NFTs of purely sentimental and aesthetic value — wen-token & wen-token-2 — were minted at 1,000 units and made freely claimable for Discord members during the months of April and May.

A long time has passed since those days. We are now ready to welcome the wen-token-3 to our community!

Unlike the first two versions, which were made by the Pyth team, wen-token-3 is originating from the community itself. For the last two weeks (ended on 29th September), anyone could submit their artwork to Discord for community voting. The most upvoted piece by Sunday, October 3rd will become the artwork for wen-token-3.

Alongside the submission of the artwork, you could submit your Solana wallet address to be airdropped this wen-token-3. In fact, 1,432 Pythians have already done so and will receive this community-made NFT from Monday 4th.

To go vote → Community vote form

Where you can “follow us”

Have you checked out our substack yet?

The Pyth substack, HiFi for DeFi, just had its 4th bi-weekly newsletter published to subscribers’ mailboxes. Don’t forget to subscribe and share it with friends and family!

This week, we have a new entrant in the Pyth channel mix (from which we expect big things): the Pyth network subreddit.

We look forward to seeing everyone there. There ought to be some great discussions, especially since Pyth network’s offering includes equity price feeds.

Where are all the places to keep updated on all things Pyth, whether it’s about data providers, protocols, or the general ecosystem?

General Shoutouts

We’ve got abundant love here at the Pyth team and we cannot be more grateful to all of you!

Thanks to you, we have broken past the 30K Twitter followers milestone, 5K verified members (Pythians) in our Discord, and close to the 4K on Telegram.

But love and camaraderie go beyond metrics. We also want to give a proper shout-out to some avid Pythians expressing their passion and support:

https://twitter.com/redacted_j/status/1443195634283073548

https://twitter.com/Wizardofsol/status/1442238323590774786

https://twitter.com/SnyIntern/status/1440994353636380673

https://twitter.com/madpopes/status/1441217273864368130

This is the end of Pythiad #3!

If you want to catch up on the first → Pythiad #1: The Journey so Far

If you want to catch up on the second → Pythiad #2: Liberating First-Party Data

Future newsletters will continue to summarize Pyth’s monthly progress and exciting things happening in our ecosystem. They will be sweet, succinct, and pithy.

Thank you for reading!

We can’t wait to hear what you think! Feel free to join any of the Pyth channels (linked above) to let us know how we can improve!

Smarter data for smarter contracts. Pyth is designed to bring real-world data on-chain on a sub-second timescale.