[ARFC] Pyth to support AAVE on Optimism as a secondary oracle

Pyth is planning to serve as a secondary oracle solution on Aave v3 Optimism. While it’s understood that initiating a three-month free trial is low-risk, it’s also recognized that it might not provide any substantial value for Aave.

As discussed, BGD claims that the fallback oracle has never been utilized and is unlikely to be used in the future. For it to be activated, the primary price feed (Chainlink) would have to return 0 or a negative value, an event considered to be an extreme edge case. As such, implementing Pyth as a secondary oracle on Aave is seen as a low-risk, low-cost move but is unlikely to support Aave significantly, and could potentially remain unused.

Currently, the CSPA solution on Optimism includes:

According to the proposal, Pyth will set up wstETH/USD and rETH/USD oracles, but we will not be able to implement CSPA without wstETH/ETH or rETH/ETH oracles.

Furthermore, Pyth could be used as another lever for our LST E-Mode Killswitch methodology. Specifically, Pyth claims that their aggregation algorithm calculates the median of all the votes received from data publishers about the price of an asset. In this system, each publisher votes three times: once at their perceived price of the asset, and once at each end of their confidence interval. The median vote becomes the aggregate price.

If we are able to obtain the confidence interval from Pyth, then we could potentially check the Chainlink price against the Pyth confidence interval and trigger the “market price depeg” killswitch lever in the case that the CL price is not contained within the interval. This would additionally require constant access to the fallback oracle, even when no malicious updates occur on the primary Chainlink oracle. At the current moment in time, we do not recommend incorporating Pyth as a secondary oracle.