The Pyth Official website provides a comprehensive discourse about its critical role in supporting decentralized finance (DeFi) as a blockchain oracle providing timely and trustworthy data feeds. Pyth Network’s most crucial significance as a provider of accurate and reliable data is demonstrated in decentralized financial trading, smart contracts, cryptocurrency exchanges, and other blockchain-based transactions.
This article further expounds on how the related DeFi applications use external or off-chain data to ensure the success of each and every decentralized financial transaction.
Why Decentralized Financial Trading Needs Accurate and Timely Data
Decentralized financial trading takes place in a virtual market where sellers and buyers can purchase or pay for financial assets without using the facilities and services of traditional financial institutions like banks, brokerages and other third-party intermediaries.
The Defi ecosystem uses blockchain technology and defi apps to eliminate the string of processes performed by conventional third party assistants. More often than not, intermediaries slow down the completion of a financial transaction. Besides, reliance on third-party services increases the risks of getting hit by security breaches, glitches, malfunctions and human error.
The blockchain system minimizes such risks through peer-to-peer (P2P)agreements and direct arrangements, Doing so allow DeFi app users to complete their trading transaction in a matter of minutes. Moreover, the exclusivity and confidentiality afforded at minimal costs by blockchain technology gives DeFi app users greater control over their financial assets.
However, it’s important for transacting parties in the Defi ecosystem to use trustworthy price information in evaluating the real time and exact value of their digital assets. Decentralized trading after all requires the speedy conversion of fiat money into the agreed cryptocurrency, which makes the accurate off-chain price feeds brought in by blockchain oracles very important. Incorrect pricing in both centralized and decentralized finance can lead to losses and vulnerabilities not only in trading but also in lending, borrowing and derivative investing.
The Importance of Authentic and Real Time Data in the Execution of Smart Contracts
A smart contract is an advanced self-executing program used in blockchain platforms. The program automates the completion of a blockchain transaction without need for external mechanisms or of a central authority that imposes legal conditions.
Smart contract developers use scripts or codes in delineating the specific conditions that will trigger the self-execution of the contract. Once executed, a smart contract becomes irreversible and at the same time trackable in the blockchain platform.
Developers of smart contracts integrate the participation of a blockchain oracle like Pyth Network. The latter is highly reputed for its capability to bring reliable and authentic data feeds into the blockchain platform in real time. Such capability will ensure that the blockchain platform will facilitate execution based on the smart contract’s predetermined rules.