The Protocol: CZ’s out, Altman’s in, and Kraken’s Sued

ORACLES’ NEED FOR SPEED: A single millisecond can make or break a trade in the world of traditional finance, but decentralized finance apps tend to operate on a much slower timescale – with certain market data taking minutes or even hours to populate on-chain. The year 2023 has marked a breakout in the race to provide lower-latency pricing data to blockchains, with oracle firms like Chainlink and Pyth Network duking it out in a battle to make on-chain trading more hospitable to speed-obsessed Wall Street speculators and high-frequency traders. Developers use oracles to shepherd off-chain data, like token prices, onto (or between) blockchains. The main issue until recently has been the inherent latency in decentralized networks, where geographically distributed nodes take time to reach consensus, leading to delays that can slow down data from oracles. Chainlink, a frontrunner in the oracle space, recently introduced Data Streams to reduce latency and operational costs, offering a pull-based oracle system that enhances efficiency. Pyth Network, an oracle firm that was in the news this week for its token airdrop, has also been an early mover in the latency race – it’s been particularly active on the Solana blockchain, where it offers low-latency pricing data sourced directly from first-party financial firms. Other players in the oracle race include Band Protocol, Witnet, Tellor, XYO Network, Razor Network and WINkLink. A key focus for the sector moving forward will be reconciling tradeoffs between speed, reliability, and decentralization – a balancing act for virtually all crypto protocols, but one that’s particularly prescient in the context of critical oracle infrastructure.

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