ARFC: Pyth to support AAVE on Optimism as a secondary oracle

Title: [ARFC] Pyth to support AAVE on Optimism as a secondary oracle
Author: @KemarTiti - Contributor, Pyth Data Association
Date: 2023-05-30


Following discussions with the BGD Labs team and the AAVE community, we are excited to propose Pyth as a backup oracle for AAVE on Optimism. We recognize the importance of diversity among DeFi infrastructure providers, particularly for systemically important protocols like AAVE, and believe endorsing Pyth as a backup oracle constitutes an advancement in realizing that objective.

We are confident that incorporating Pyth as a secondary oracle will yield clear and material benefit for AAVE, its participants, and the wider community. These benefits are rooted in three core principles: resilience, competition, and decentralization.

  • Resilience: The core function of any secondary oracle is to serve as a backup data source. If the primary oracle experiences downtime or becomes compromised, secondary oracles can step in and provide the necessary data to ensure the continued operation of critical collateralization monitoring. This redundancy creates a more resilient AAVE and reduces the risks associated with any potential single point of failure.
  • Competition: Pyth’s presence as a secondary oracles on AAVE introduces competition among other providers as well — which drives innovation and continued improvements in data quality, costs, latency, and security, ultimately benefiting the AAVE in the process.
  • Decentralization: Incorporating secondary oracles providers add an added dimension of decentralization. By relying on multiple data sources, AAVE become less susceptible to the centralizing influence of any single oracle provider, thereby reinforcing the core principles of decentralization and censorship resistance.

About Pyth

The Pyth Network serves as an oracle provider, delivering financial market data to an array of blockchains. Pyth’s market data is sourced from 80 primary data providers, encompassing some of the world’s most prominent exchanges and market-making enterprises. Presently, the oracle hosts over 200 price feeds spanning diverse asset classes, including US equities, commodities, foreign exchange, and cryptocurrencies.

Pyth’s price feeds have been meticulously engineered for speed, precision, and dependability. It’s price feeds update multiple times per second—live price updates can be viewed on here. Each price update is an aggregate of reputable data providers’ reported prices. This aggregate price is determined by robust aggregation procedures to ensure that colluding (or mistaken) providers cannot materially influence the aggregate price.

Pyth has already proven to be a robust and reliable oracle provider on Optimism. Functioning as the principal oracle for the Synthetix protocol, Pyth has efficiently served 40 perpetual markets with $10B Traded Volume for over 5 months. More broadly, to date (launched in mid December 2022), the Pyth has already delivered close to 1.5 million price updates on-chain—with an ATH of 25K on-chain price updates in a single day.
Daily On-Chain Price Update

Robustness through Data Providers

Pyth counts its highly reputable data providers as its flagship strength. The Pyth Network boasts 80 leading data providers spanning the largest crypto exchanges and leading market making firms. To better illustrate, we highlight a subset of the providers behind Pyth’s ETH and BTC symbols.

  • Binance — Pyth data provider since Nov 2022, Binance is the largest crypto exchange by volume and market share, facilitating nearly $10 billion in trading volume in the past 24 hours alone.
  • Optiver — Pyth data provider since October 2022, Optiver is a global market maker with offices in Amsterdam, London, Chicago, Austin, Sydney, Shanghai, Hong Kong, Singapore and Taipei. By providing liquidity on multiple exchanges across the world in various financial instruments the firm participate in the safeguarding of healthy and efficient markets.
  • Jane Street — Pyth data provider since August 2021, 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. In 2020, Jane Street traded more than $17 trillions worth of securities.
  • OKX — Pyth data provider since October 2022, OKX is the second biggest global crypto exchange by trading volume. Trusted by more than 20 million global customers, OKX is known for being one of the fastest and most reliable crypto trading platforms for investors and trades everywhere.
  • Wintermute — Pyth data provider since March 2022, Wintermute is a leading global algorithmic trading firm in digital assets. They provide liquidity algorithmically across over 60 centralized and decentralized exchanges and facilitate the OTC trading of 250+ tokens, with average daily volume of over $5 billion.
  • Virtu Trading — Pyth data provider since June 2021, Virtu Financial is one of the worldwide leaders in trading and execution services providing liquidity for over 25,000 securities, spread over 235 venues and 50+ countries. Virtu handles nearly ~30% of market orders placed by retail investors in the US and accounted for nearly 10% of the total US stock trading volume in December 2020.

Pyth’s data publishers are well-known and established leaders in their respective industries and markets — and thus confront significant reputational and financial consequences should they attempt to partake in malicious activities as data providers.

More information on Pyth’s +80 data providers can be found here.

Resilience through Price Aggregation

Pyth robustly aggregates the quotes of these data providers to provide another level of protection against accidents or manipulation. This prevents any single data provider from materially influencing the Pyth price for their own economic gain. For example, even if publishers are submitting a price of $100 and one publisher submits a price of $80, the aggregate price should remain near $100 and not be overly influenced by the single outlying price.

Scenarios for the aggregation procedure. The lower thin bars represent the prices and confidence intervals of each publisher, and the bold red bar represents where we would like the aggregate price and confidence to be.

Pyth can attribute this robustness to its simple yet comprehensive two-step aggregation algorithm. In the first step, data publishers provide three votes on the price of the asset — one vote at their price and one vote at each of end (+/-) of their confidence interval — following which Pyth simply calculates the median of all the votes. The second step computes distance from the aggregate price to the 25th and 75th percentiles of the votes, then selects the larger of the two as the aggregate confidence interval.

This process acts like a hybrid between a mean and a median, giving confident publishers more influence, while still capping the maximum influence of any single publisher. The algorithm has an interpretation as computing the minimum of an objective function that penalizes the aggregate price from deviating too far from the publishers’ prices. In addition to producing high fidelity price, Pyth also provides confidence that is representative of the estimated uncertainty of the price, allowing protocols to actively adjust their risk parameters.

Pyth has proven to be consistent and reliable. For example, defining downtime as a period in which the most recent Pyth update was at least 5 slots (~2 secs) old, Pyth had 99.97% uptime for ETH/USD over the one-week period of March 28, 2023 through April 4, 2023. When that definition is altered to allow a max staleness of 10 slots (~4 secs), Pyth had 100% uptime for that feed over that period.

Pyth’s Architecture

Pyth runs aggregation for its Pythnet Price Feeds on its own application-specific blockchain called Pythnet. Prices are delivered from Pythnet to other blockchains via the Wormhole interoperability protocol and a permissionless price update model.

Pythnet is a proof-of-authority chain where the data providers run the validators for the network. This blockchain serves as the computation substrate to securely and reliably combine the data providers’ prices into a single aggregate price for each Pyth price feed. Pythnet forms the core of Pyth’s cross-chain price feeds that serve all blockchains.

Pyth bridges prices from Pythnet to other blockchains using Wormhole. Wormhole is a generic cross-chain message-passing protocol that allows anyone to send secure messages between blockchains. Pyth sends a continuous stream of price messages from Pythnet through Wormhole. These messages are signed such that anyone can validate their authenticity. Anyone can post one of these messages on a target chain that Pyth supports to permissionlessly update the on-chain price.

Pyth’s permissionless update model allows for several different integration strategies. For example, protocols can be designed to update the Pyth price and consume it in the same transaction. Alternatively, an off-chain service can regularly push price updates on-chain, and protocols can directly read the on-chain price.

Integration with Aave

Based on discussions with BGD Labs, we have determined that a push-based integration is the most straightforward. The AAVE protocol already has a notion of a backup oracle provider that Pyth can fit into with minimal development work. In this integration, Pyth will adapt to the contracts’ interface of the AaveOracle smart contract — reading on-chain prices for any of the supported assets, in a similar way to any other integrated oracle.

In order to support this integration, the Pyth Data Association will operate a price pusher. This pusher will regularly update Pyth’s on-chain price on Optimism for all assets supported by Aave (DAI, USDC, USDT, AAVE, LINK, OP, BTC, ETH, stETH). This design allows Aave to natively read the Pyth prices on Optimism at no extra cost. The Price Pusher will update all the following assets prices on Optimism: DAI, USDC, USDT, AAVE, LINK, OP, BTC, ETtH, stETH, at a frequency of every 30 minutes or 0.25% price deviation (whichever is faster).

The Pyth Data Association will sponsor a grant to update the Pyth prices on Optimism for no less than 3 months. Based on the selected parameters and analysis of historical pricing data, price updates for volatile assets (BTC, ETH, OP, AAVE, LINK, stETH) are expected to be triggered about 100 times per day while stablecoins would normally be updated every 30 minutes (or 50 times per day). Altogether, we estimate a total of 500 transactions per day (as Pyth can batch multiple updates into one transaction).

Simulating a push-based Pyth over April 2023 with updates every 1200s or during any 15bps deviation—Chainklink’s current parameters—Pyth performs well with strong price-robustness and accuracy.

ETHUSD Deviation CDF


Ending Thoughts

Selecting an oracle, even for backup support, requires careful consideration of several factors, such as accuracy and robustness. Pyth’s proven track record, robust design, and reputable data providers make it a strong candidate to support AAVE’s oracle needs. We are happy to answer any questions.


Having looked over this proposal, we are in alignment with Pyth on incorporating it as a secondary oracle on Optimism. Resiliency, especially for key infrastructure like oracles, is critical. Pyth as a backup to be used only if Chainlink goes down or faces issues makes sense to us, as does this deployment as a secondary oracle on Optimism as a trial for Pyth to be used more broadly across the Aave ecosystem.


As a representative from Synthetix, we have firsthand experience using Pyth as an oracle provider for Synthetix Perps. They have facilitated the expansion into 40+ perps markets, enabling us to cross the $10b total volume mark recently and design a system that on-chain perps traders love. We have found immense value in their robust, reliable service and high-quality support.

Utilizing Chainlink as our on-chain backup oracle for Synthetix Perps has brought decentralized redundancy and security to the system design, affirming my belief in the power of multiple data sources. I am strongly in favor of this proposal to incorporate Pyth as a secondary oracle for AAVE on Optimism.

This proposal, in my view, isn’t just a good idea—it’s the correct approach to designing systems that are not reliant on a single source. I fully endorse Pyth to serve as a backup oracle for AAVE on Optimism and look forward to seeing the benefits it will bring to the wider DeFi ecosystem.


We support this proposal as it diversifies oracle feeds and Pyth’s record is definitely proven.

It will be a great test to run on Optimism markets with the potential of expanding on the overall Aave ecosystem!


It’s good to see an endorsement from current users including @MattLosquadro

The approach of using a “fallback” oracle seems to be a suitable way of introducing and evaluating new technologies into Aave while preserving the trust in Chainlink.

We support this initial integration as a secondary oracle.


As a representative of Index Coop, I am writing to express our support for this proposal. At Index Coop, we recognize the integral role that robust, secure, and reliable oracles play in the smooth functioning of our industry. We believe that integrating Pyth as a backup oracle for AAVE on Optimism is a significant step forward in achieving a diversified, resilient, and decentralized DeFi ecosystem


We are supportive of this proposal and believe having Pyth as a fallback oracle positively improves the robustness of Aave through higher resilience and decentralization. Wintermute has been working with Pyth as a data provider for a while now and can attest to the professionalism of the team and the amazing product they have built.


I just want to say this proposal is a great idea! I agree 100% with everything Matt said! Pyth has proven themselves over and over.


:wave: Hi! I’m Julian, the founder of Ribbon, DeFi’s first and largest structured products protocol. We’ve been happy users of Pyth for over a year, and we’ve found their price oracles to be the most accurate in the market. Especially since we’re settling $30-50m of derivatives contracts every Friday at a specific time (8am UTC), we need pin-point accuracy (to the basis point) for the price feeds — which is what Pyth has offered.


Hi all! I’m Smit, Head of DeFi at OP Labs. I can speak to how valuable oracle diversity is for our teams and partners who count on these services to keep things running smoothly for users. In addition to providing a backup in the event one oracle provider experiences issues, developers appreciate having options and increased oracle options may provide different feeds or pricing, along with other differentiators in experience. Expanding the oracle variety throughout the ecosystem is a win for the Collective on whole, and we’re supportive of proposals that aim to increase this diversity within the Optimism ecosystem.


Thanks @KemarTiti and the Pyth team for the proposal !

From the technical side, we think it is a good moment to give some extra context to the community about the rationale of the fallback oracle and our position on it.

The fallback oracle is a mechanism introduced with Aave v1, not really used since then, but kept in order to enable any potential integration of a mechanism to cover an edge case of the primary oracle.

Its logic is the following: if at any point a primary price feed (Chainlink) would return 0 or a negative value for an asset, the AaveOracle smart contract would try to call the address configured as fallback oracle to retrieve an alternative price.
This scenario is a really edge case, because once there is a price on-chain on the primary oracle, for it to become 0 or negative, there should be a malicious update.

Later on in the lifetime of Aave v1, and with v2 and v3, it was realized the scenario is almost not possible, as it implies not trusting the security of the primary oracle; which would disqualify it for Aave to start with. Thus, the fallback was first not really active (v2) and completely disabled later on (v3).

As we commented with the Pyth team, from BGD we don’t really see much value in the fallback oracle as it is, given its “legacy” nature, but if it doesn’t create any extra burden to the community (e.g. additional cost), we don’t have a strong stand against enable it.

As always, it is up to the Aave community to decide.


Hi everyone!

I’m a Lido DAO BD core contributor and wanted to share my positive experience with the Pyth team. They have demonstrated professionalism and have been great to work with.

I’m really pleased to see this coming to life and believe it will be well received by the broader community and other projects. Research and governance forums often struggle to gather diverse perspectives, but I’m glad to see supportive sentiments already being expressed here.

I would like to commend the Pyth team for taking a conservative and mature approach by aiming for the secondary oracle position and one chain before moving toward a higher position. This demonstrates their deep understanding of the risks associated with oracles, both in terms of primary impact on Aave and potential effects on other projects and users.

Furthermore, this will send a positive message to the blockchain industry that Aave is actively working towards decentralizing the current oracle market. This is an important step towards reducing risk and setting the stage for future scalability.

Keep up the great work!


Hi, I’m Burt Rock. I work with Kwenta and was on the Synthetix Spartan Council, giving one of the deciding votes to approve use of Pyth oracles as the fast oracles used to fill prices for traders on our perps platform.

Just wanted to chime in and say we’ve had a great experience working with Pyth. Synthetix has been watching the oracle performance and reliability very closely and have had no issues with the quality of the data. We can’t be happier with the results from a product standpoint.

In terms of working with the Pyth team, they’re extremely responsive and have provided support on multiple fronts, everything from getting requested feeds up quickly, helping us improve the performance of the charts on our FE, to providing marketing support.

I think decentralizing the oracle market is healthy for the whole ecosystem, and couldn’t recommend Pyth enough. Thanks!


We support diversity and resilience in oracle providers. Having Pyth as a backup oracle is a safe way to test a different oracle design. Pyth’s 3-month grant to update prices on Optimism makes the test cost-effective for Aave. Overall we think this is a good approach to evaluate the technology and its suitability for further expansion on Aave in the future.

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