New Ideas for Oracle Machine: the NEST Protocol for On-chain Price Facts

In the summer of 1954, computer science pioneer Alan Turing committed suicide by poisoning at his home in Manchester, England. As one of the founders of artificial intelligence and computer science, Turing's death shocked the academic community. To honor this outstanding scientist, one of the highest honors in the field of computing was named the "Turing Award."

Turing envisioned a magical box that could continuously provide data for computers during his lifetime. In centralized systems, inputting information is not difficult, but ensuring the authenticity of the data and preventing human manipulation is a significant challenge.

The blockchain field has been exploring new ways to realize Turing's vision. With the booming development of decentralized finance ( DeFi ), "Oracle Machines" that provide price data for DeFi products have gradually moved from niche to mainstream.

Currently, various oracle projects are competing with each other, each with its own characteristics. NEST Protocol takes a different approach by placing the price formation process on-chain, forming "actual prices" through users participating in "quotation mining" and arbitrage games on different trading pairs, eliminating the trust costs associated with off-chain processes. The NEST protocol offers rich token incentives for "quotation miners," allowing participants to earn NEST tokens or nToken, and share ETH earnings weekly.

The "quote mining" of NEST Protocol is simple and reliable, similar to Bitcoin's POW, and its token economic model resonates with the currently popular "liquidity mining", providing sufficient incentives for participants. It can be said that NEST Protocol has completed all aspects of the Oracle Machine on-chain, making it one of the ideal forms of the Oracle Machine.

Potential Value Pits in the Oracle Machine Field

Most Oracle Machines rely on independent off-chain gaming systems to provide data and form consensus through external node networks. This approach has a certain trust cost; users must trust the off-chain data acquisition process. Therefore, many projects focus on how to ensure the authenticity of external network data and the credibility of nodes through mechanism design, but often the mechanisms are too complex and difficult to control.

The NEST protocol aims to eliminate uncontrollable factors and directly conduct games on-chain to form a true "price fact". The generation of "price facts" in the system mainly relies on two types of participants: quoting miners and validators.

The quoting miners deposit a certain proportion of two tokens, such as ETH and USDT(, into the NEST contract at what they consider a reasonable market price, and pay a handling fee. There is a minimum threshold for quoting, currently the minimum unit is 30 ETH, and a 1% handling fee must be paid.

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After the user completes the quotation, the price will be announced and open to challenge within approximately 5 minutes. If no one challenges the arbitrage, the price is considered reasonable and can be viewed as the current market price; otherwise, it will be corrected by arbitrageurs. Arbitrageurs must also provide a quotation that is double the amount of the market order for subsequent arbitrageurs to challenge.

This mechanism of price discovery using "real money" can effectively prevent price manipulation, forming "price facts" entirely on-chain. Data users can see the entire process without needing to trust the data source. Correct pricing is incentivized, while malicious pricing results in financial losses due to arbitrage. As the capital pool grows, the cost of malicious pricing will become extremely expensive and will be corrected by the entire market. Therefore, the price formed on-chain is a truly decentralized fact.

In addition, NEST token holders can regularly share the fees collected by the system and play a more important role in NEST 3.0. When creating and bidding for new ERC20 Token/ETH trading pairs, NEST tokens are required. Unsuccessful bidders can even recover their funds in excess, thereby incentivizing market participation.

Comparing the entire track horizontally, NEST's current position does not match its value. A完善的代币经济 makes it highly growth potential. From the project valuation perspective, the Oracle Machine track is dominated by one player, with the leading project's market capitalization being several times that of NEST. As a pioneer of the "price fact" solution, NEST has significant room for value appreciation. With the booming development of the DeFi sector, NEST is expected to become the preferred solution for more projects.

The token economic model highlights development potential

A diversified incentive model can provide positive feedback to ecosystem participants from multiple angles, stimulate the prosperity of the secondary market, and even become a long-term stable investment choice.

In addition to introducing incentives and game mechanisms during the data generation phase, NEST has a unique incentive design for token holders. NEST and nToken holders can deposit their tokens into the contract and receive system ETH earnings weekly. This adds a dividend mechanism beyond governance, incentivizing holders to participate in ecological construction.

Currently, the revenue of NEST and nToken mainly comes from the fees charged by quote miners and the usage fees for downstream applications that call data. All fee collection and distribution are completed by smart contracts, ensuring full transparency throughout the process.

On the other hand, the nToken system of the NEST protocol supports quoting for any ERC20/ETH trading pairs. Users can initiate the creation of Oracle Machine trading pairs, which, after a bidding process, can be successfully activated. The funds used for bidding will be permanently destroyed. This gives NEST the potential for "infinite deflation." As more quality projects are integrated and trading pairs increase, NEST tokens will continue to be destroyed, further enhancing their value.

Building New Infrastructure for DeFi

Compared to the simple "information flow" Oracle Machine, NEST forming "price facts" on-chain is a difficult path. Most Oracle Machine systems have chosen a lower-threshold consensus model for rapid expansion. However, on the issue of "trusting data" versus "trusting facts", NEST has provided its own answer.

By utilizing the real fund quotes from on-chain miners, a sandbox pricing market is formed. Driven by interests, validators ) and arbitrageurs ( will continuously adjust the data to bring it closer to the true price. As the pricing market flourishes, the entire NEST protocol ecosystem will become increasingly robust. However, the information-injected Oracle Machine field may become a red ocean due to its low entry barrier, and the emergence of malicious projects during the competition could lead to a loss of trust in "price information."

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Instead of transporting off-chain data, real data is generated in a decentralized manner on-chain. This trustless method will surely scale with the development of the DeFi ecosystem, which in turn can enhance data efficiency and accuracy, creating positive feedback. With the increase in validators and arbitrageurs, the cost of project transfer continues to rise, and the NEST protocol is expected to create a winner-takes-all situation in the Oracle Machine track.

The crypto community has a saying: "Don't trust, verify"). Do not believe easily, but verify(. The NEST network is a practitioner of this concept. When building a "perfect" quoting system, one must assume the maximum lies and the greatest malice. Only in such a harsh environment can real on-chain information be formed, which qualifies as an excellent Oracle Machine system.