Demand-side activity grew by 17% in Q2, as Pyth published 246 million pull oracle updates across 70 blockchains. Pyth transitioned to a pull oracle model on Solana in Q2.
Pyth Entropy has processed 265,000 requests since launching near the end of Q1, bringing in $19,000 of revenue in Q2. The broader Pyth protocol added support for 45 new price feeds and expanded to 14 new blockchains. It was also integrated into 51 new applications.
Pyth grew its publisher network to 107 data providers in Q2, up 7% from 100 in Q1.
Pyth launched Express Relay, an offchain priority auction network to eliminate harmful MEV affecting DeFi protocols and DeFi participants.
Pyth oracles were selected by Gauntlet to secure its yield-bearing vaults on Morpho’s DeFi lending protocol.
Primer
Pyth (PYTH) is an oracle network that aims to offer accurate prices for cryptocurrencies, equities, foreign exchange pairs, ETFs, and commodities. Oracle networks aggregate external data and make it available for onchain application use. Pyth fosters a network of first-party (primary source and aggregator) data providers and coordinates a “pull” oracle model. This model scales price feeds across many chains and lowers network costs by offloading update fees to data consumers (applications and developers). Pyth offers four core products:
The integrity of Pyth’s data is dependent on its contributing publisher network, which comprises over 107 data providers from global exchanges, trading firms, market makers, institutions, and DeFi. A few notable providers include Jane Street, Cboe Global Markets, Binance, Raydium, Osmosis, Galaxy, and 0x. Pyth is focused on making financial market data available to developers on an expanding list of blockchain networks (70+ blockchains as of writing). For a full primer on Pyth, refer to our Initiation of Coverage report.
Total value secured (TVS) represents the cumulative value of assets covered by an oracle network. When an oracle provides the necessary data for operating a DeFi platform, such as prices for assets being used as collateral, TVS would include the value of the assets in contracts reliant on the oracle's data.
Pyth’s TVS showed some volatility throughout the quarter, ultimately falling 15% QoQ. However, it remained above $4 billion throughout all of Q2 and ended at $4.7 billion, which is 158% higher than its TVS at the end of Q4’23. The above chart is based on DefiLlama data, which does not yet cover Ethena. Including Ethena, Pyth’s TVS actually rose 13% in Q2, ending at $8.1 billion. Excluding Ethena, Pyth’s 15% fall in TVS was quite minor, considering how bearish Q2 was for many protocols.
Countering the volatile conditions in Q2, Pyth added support for 14 new blockchains, connected to 45 new price feeds, and integrated into 51 new applications. The demographics of the top five protocols that Pyth secures changed throughout the quarter. In Q1, the top five were Solana-based applications. This quarter, only three were Solana-based: Kamino, Jupiter, and Drift. The remaining two were Avalon Finance (most activity on Bitlayer) and ZeroLend (most activity on Linea).
Collectively, these five protocols accounted for 46% of Pyth’s TVS by the end of Q2. The other protocols in the top 10 also operate on various chains. These include Marginfi (Solana), Aries Markets (Aptos), Solend (Solana), Yei Finance (Sei), and Ionic Protocol (Mode). Collectively, these protocols accounted for 25% of Pyth’s TVS. As such, 71% of Pyth’s TVS is concentrated in the top 10 applications across 17 blockchains. Though Pyth’s TVS became slightly more concentrated throughout Q2, it showed that the growth of newer protocols can impact Pyth’s TVS demographics quite significantly.
Price Updates
As a pull oracle, Pyth demand is measured in the number of price updates it publishes. DeFi users of Pyth-secured applications make smart contract calls that trigger Pyth price updates in the same transaction.
Demand grew for Pyth oracles as price updates increased 17% QoQ, reaching 246 million updates in Q2. After transitioning the oracle model on Solana from a push to a pull, Solana accounted for 4% of the price updates in Q2. With minor changes quarter-over-quarter, Sui accounted for 65% of price updates, while Aptos accounted for 30%. This concentration shows that high throughput chains are driving over 99% of the activity on Pyth. The low-cost nature of Move-based chains likely makes Sui and Aptos more appealing for high-volume activities in DeFi, such as DEX trading, algorithmic trading, and perps trading. Also relevant, Pyth secures roughly 100% of the traded volume on both chains, meaning all DEX, perp, and most other DeFi activity on these chains use Pyth oracles almost exclusively.
Since Pyth transitioned its oracles on Solana to a pull model, most price updates have been sponsored. Sponsored updates are transactions pulled in regular intervals through the Pyth Scheduler, a permissionless offchain application that anyone can run to regularly pull price updates based on various conditions. Applications that require regular updates would use the Scheduler to ease the transition to Pyth oracles, which is likely why sponsored updates accounted for 90% of Q2 updates on Solana. Non-sponsored updates are simply updates not run through the Scheduler. And atomic updates are also non-sponsored but are partially verified (five or fewer Wormhole Guardian signatures) to increase transaction atomicity. In contrast, sponsored transactions are also fully verified, meaning they have 13 Wormhole guardian signatures.
Activity on EVM chains also grew in Q2, reaching 2.5 million price updates, up 23% QoQ. Base, zkSync Era, and Arbitrum saw outsized growth in price updates in Q2, processing 227,000 (+455%), 250,000 (+37%), and 172,000 (+45%) updates throughout the quarter. The growth of Base’s dominance indicates that Pyth oracles are becoming increasingly popular among various other chains. Arbitrum’s growth may have been partly inspired by the grant Pyth received from the Arbitrum Foundation to incentivize the usage of the oracle on the blockchain by giving gas fee rebates to applications executing oracle updates.
Revenue
Revenue is a function of price updates and random number requests to the Entropy contracts. Pyth charges an oracle fee for each price update and random number request. To incentivize adoption for price feeds, the oracle fee is currently the lowest denomination of the native gas token on the chain where the oracle update is published. As adoption increases, Pyth plans to increase the oracle fee, which will also increase revenue for the protocol. This revenue will be paid to data providers as an incentive for them to continue publishing data to Pyth.
Yet to show meaningful revenue due to price updates (which is expected until it increases the oracle fee), Pyth Entropy added $19,000 to Pyth’s revenue in Q2. Because 99% of price updates are processed on three chains, Pyth’s increase of the oracle fee on Sui, Aptos, and Solana will likely have the most impact on revenue. Pyth is in a unique position in that it can significantly increase its oracle fee without disrupting the end user experience — especially since most of the volume is on high-throughput chains. Even a small fee adjustment (to the user) could greatly increase protocol revenue. As Pyth continues to onboard new chains and get integrated into more applications, its potential to grow revenue will become more potent as it considers adjusting the oracle fee for all protocols.
Entropy
Pyth Entropy enables developers to generate secure random numbers on the blockchain. It provides security guarantees based on two-party randomness that ensure numbers can be trusted as random. As of writing, Pyth Entropy is only available on 13 EVM networks. Pyth Entropy is ideal for use cases requiring randomness, such as NFT mints, games, and even consensus.
Pyth Entropy was launched at the end of February 2024. It started to pick up meaningful traction in late May. Since launching, it has processed 265,000 requests, bringing in $19,000 in revenue for the protocol. In addition to price updates, entropy requests are another avenue for Pyth to achieve protocol revenue. As Pyth expands Entropy’s support to more chains, requests and revenue should continue growing.
User Costs
Although the cost of pulling a Pyth update is negligible, users must still pay the gas associated with their DeFi transactions. These gas costs are exclusive to users; Pyth does not bear any cost from this.
The Dencun/EIP-4844 upgrade, which was implemented in mid-March, severely cut user costs on EVM chains using Pyth oracles in Q2’24. Gas costs that users paid to make DeFi transactions using Pyth oracles on EVM chains fell by 73% QoQ, from $2.4 million to $646,000. The biggest savings were made by users of Optimism, Arbitrum, and zkSync Era (all of which saw growth in price updates in Q2). With Solana’s transition to a pull oracle, Solana user costs will be introduced in the coming quarters, revealing how it compares to costs on EVM chains.
Solana Transaction Share
Though Pyth’s transactions as a percent of total Solana transactions fell to 6% at the end of Q2, it is still one of the most used protocols on Solana. This drop was foreseeable (and predicted the previous quarter), coming amid Pyth’s transition from a push to a pull oracle model on Solana. Given that pull oracles are on demand, Pyth is not publishing updates to Solana every 400 milliseconds (a Solana slot time).
In previous quarters, Pyth’s push oracle helped the protocol consistently account for up to 48% of Solana transactions (even up to 60% depending on the day). However, Pyth will likely not return to accounting for this level of capacity on Solana. Not returning will actually benefit the data providers that paid $738,000 to publish updates to Solana in Q1. This metric will be omitted in future reports given its waning relevance.
PYTH Staked and Market Cap
Despite a 68% fall in the price of PYTH and a 72% drop in the amount of staked PYTH (leading to a larger amount of PYTH eligible to be sold), the market cap only fell by 22%. This is largely attributable to the 142% growth in the circulating supply, as 2.1 billion PYTH was unlocked in Q2’24. This unlock had two principal effects: a high degree of sell pressure and the initial spike in market cap size in May. This foreseeable jump in sell pressure may have encouraged PYTH stakers to unstake, adding sell pressure to the asset. The added pressure ultimately led to the dollar amount in PYTH staked dropping from $1.3 billion to $359 million by the end of Q2.
Token Unlocks
PYTH’s first token unlock occurred in the middle of Q2’24. On May 19, 2024, 2.13 billion PYTH was distributed to the following parties/for the following purposes:
Private Sale Participants: 250 million PYTH (7% of the circulating supply)
Publisher Rewards: 538 million PYTH (15% of the circulating supply)
Protocol Development: 213 million PYTH (6% of the circulating supply)
Ecosystem Growth: 1.1 billion PYTH (31% of the circulating supply)
PYTH unlocked to private sale participants and publishers accounted for 22% of the updated circulating supply. With the PYTH price falling 68% QoQ, the unlock of these allocations may have put sell pressure on the asset as these parties may have been interested in taking profits. Data providers (publishers) may be especially interested, given that publishing updates on Solana cost them $738,000 in Q1 alone.
Qualitative Analysis
Protocol Updates
Express Relay
Pyth recently launched Express Relay, an offchain priority auction network to eliminate harmful MEV (maximal extractable value) affecting DeFi protocols and DeFi participants known as searchers. Searchers will join this network and have the opportunity to bid on valuable transactions for DeFi protocols that have integrated with Express Relay. The searcher bids that maximize revenue for the DeFi protocol will win the auction and ultimately get run onchain. Express Relay will be initially used to solve the MEV problem with respect to liquidations in lending protocols. In the future, it may also be used similar to RFQ systems in DEX protocols.
In lending protocols, loans are often collateralized with various digital assets. If the value of the collateral falls below a certain threshold, the loan becomes undercollateralized based on the loan-to-value ratio. At this point, the protocol initiates a liquidation process to repay the loan by selling the collateral. Searchers monitor these protocols for undercollateralized positions to participate in the liquidation process. Searchers compete with each other to be the first to act on profitable opportunities. This competition can lead to high transaction fees as searchers bid to have their transactions processed first by the blockchain, which leads to validators extracting much of the value from the liquidation process. Express Relay removes the MEV that validators extract in this situation by determining offchain which searcher will perform the liquidation.
Protocols like Aave and Compound have spent at times over $100 million on liquidation incentives, with much of this value being lost to MEV. The cost of MEV can discourage searchers from participating in DeFi, weakening the security of particular protocols. Express Relay removes the need to bid for blockspace to validators, removing this form of harmful MEV. In addition to aiding searcher profitability and helping DeFi protocols retain searchers (and bootstrap searcher networks), integrating with Express Relay can allow protocols to set more economical liquidation incentives and pass down savings to stakeholders. Express Relay is already implemented in various protocols, like Synthetix, ZeroLend, and Ionic. It also already has a robust searcher set with notable entities such as Wintermute, Caladan, and Flowdesk.
Pull Oracle on Solana
Most oracles use a third-party push model to solve the oracle problem. On the 70 blockchains that Pyth supports (minus Solana), Pyth has always used a first-party pull model. It started with a push model on Solana due to the initial ease of implementation and Solana’s low fees, keeping it inexpensive to post regular updates. However, recently Pyth launched its pull oracle on Solana, seeking to gain some of the benefits of the pull model while avoiding some of the pitfalls of the push model.
Push oracles push price updates to individual blockchains at set intervals, paying gas costs for every onchain update. Adding price feeds or decreasing latency between onchain updates incurs more costs for the oracle network, impeding its ability to scale. Additionally, during times of congestion and high volatility, price updates can be unreliable with different Solana users paying priority fees to publish valuable transactions (i.e., liquidations or DEX trades). Pyth’s pull oracle on Solana aims to address these issues and add further benefits.
Pull oracles only update prices when requested in onchain transactions. And Pyth’s model price feeds are hosted on the Pythnet appchain, and there is an SVM instance that aggregates price updates from data publishers and makes them available to any chain seeking to pull the update. Pyth’s pull model can scale price feeds on all supported chains simultaneously, instead of building new price feeds on each chain individually. Pulling updates in transactions takes away the competition of oracle updates against other users’ transactions, which can increase the reliability of oracle updates. Other consequences of Pyth updating Solana to its pull model include access to historical data (Pyth Benchmarks on Pythnet) and oracle availability on new SVM chains (given that the Solana pull oracle lays the foundations for oracle support of new SVM ecosystems).
Governance
The PYTH token is an SPL token on Solana. The core utility of PYTH is governance. PYTH holders can guide protocol development by staking the asset and voting on Pyth Improvement Proposals (PIPs). Pyth DAO also consists of the Pythian Council and the Price Feed Council. Both councils are responsible for the voting and implementation of certain Operational PIPs.
Pyth DAO has two types of PIPs: Constitutional and Operational. Constitutional PIPs involve protocol updates, determining structure, and guiding the administration of the Pyth DAO. They require greater than 67% support for implementation. Operational PIPs involve elections and the management of the treasury, Pythian Council, and Price Feed Council. Voting on these PIPs can be delegated to Council members and require greater than 50% support for implementation.
PIPs
Throughout Q2, Pyth has shown to be one of the most active token-voting DAOs on Solana, falling behind only Jupiter. Three Consitutional PIPs and ten Operational PIPs were approved throughout Q2. The relevant PIPs are listed below.
Constitutional
PIP 001: Adoption of the Pyth DAO Constitution, a document forming the decision-making framework for PYTH holders.
PIP 002: Addresses an error made during the initial distribution of PYTH locked tokens and updates the Staking Program with respect to this reconciliation.
PIP 006: Upgraded the Entropy contracts on all testnet chains to enable users to register a callback after making a random number request — this callback is automatically called after the request is fulfilled, reducing developer interactions with the contract to a single transaction.
PIP 007: Upgraded the Pyth Solana Receiver on Solana to employ the hashv function, lowering the computation costs of posting price updates.
PIP 008: Upgraded the Entropy contracts on all mainnet chains to enable users to register a callback after making a random number request — this callback is automatically called after the request is fulfilled, reducing developer interactions with the contract to a single transaction.
PIP 010: Implemented performance upgrades to the Pyth oracle program that are expected to decrease the compute unit usage of price updates by 10–30%.
PIP 011: Updated the Blast testnet Entropy contract to add a fee manager role (can set fees and withdraw accrued fees) and enable gas fee claims (collect a share of gas fees spent in Entropy interactions).
PIP 012: Updated Entropy contracts on all testnets (minus Blast) to add a fee manager role (can set fees and withdraw accrued fees).
PIP 013: Updated the Blast mainnet Entropy contract to add a fee manager role (can set fees and withdraw accrued fees) and enable gas fee claims (collect a share of gas fees spent in Entropy interactions).
PIP 014: Updated Entropy contracts on all mainnets (minus Blast) to add a fee manager role (can set fees and withdraw accrued fees).
PIP 015: Updated the Pyth Update Fee on the existing Pyth oracle contract on opBNB from 10-18 BNB to 0.000186 BNB ($0.10 with a BNB price of $568).
Partnerships and Integrations
Pyth Network announced a series of partnerships and integrations throughout Q2. It added support for 45 new price feeds (551 total), expanded to 14 new blockchains (70 total), onboarded 7 new data providers (107 total), and integrated into 51 new applications (381 total). A few notable partnerships and integrations for each category are listed below.
Price Feeds: W, ENA, DRIFT, ZK, and BODEN
Blockchains: Parallel, XION, Eclipse, Taiko, Fuel, and Kaia
Data Publishers: Portofino Tech, Cables Finance, SynFutures, and Keyrock
Application Integrations: Meridian Finance, Suilend, HLiquity, Kresko, and PRDT
Gauntlet and Morpho
Gauntlet is a quantitative research and risk management firm that builds solutions for DeFi clients to optimize their economics, facilitate growth, and manage risk. Morpho is a DeFi lending protocol that enables anyone to permissionlessly create ERC-4626-compliant tokenized yield-bearing vaults with custom risk management parameters. As one of the most trusted companies within DeFi, Gauntlet was the first entity approved as a MetaMorpho vault curator. The core parameters in MetaMorpho vaults include the Liquidation Loan-To-Value ratio, oracle, and interest rate model. Gauntlet uses Pyth oracles to secure its MetaMorpho vaults.
Closing Summary
In Q2, Pyth Network experienced substantial growth, with its demand-side activity increasing by 17%. During this time, the protocol published 246 million pull oracle updates, added 45 new price feeds, expanded across 14 new blockchains, and integrated into 51 new applications. Notably, Pyth oracles were chosen by Gauntlet to secure its yield-bearing vaults on Morpho. Pyth also continued to ship developments, launching the Express Relay network and transitioning its oracle model on Solana from push to pull oracles. By delivering innovative products and fostering consistent growth, Pyth is positioned to continue expanding its protocol and serving DeFi across the industry.
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