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NEST Oracle Machine: The Turing Box on Blockchain Leading the Innovation of DeFi Price Data
The Legacy of Computer Science Pioneers and the Innovation of Blockchain Oracle Machines
In the summer of 1954, the father of computer science, Alan Turing, passed away at his home in Manchester, England. As a pioneer of modern artificial intelligence and computer science, Turing left a profound impact. To commemorate his contributions, the highest honor in the field of computing, the "Turing Award," was established.
In Turing's research, there was an interesting idea: a magical box that could continuously provide data to computers. However, ensuring the authenticity of this data became a technical challenge. This concept coincides with the pursuit of "information authenticity" in today's Blockchain field.
With the rapid development of decentralized finance ( DeFi ), "Oracle Machines" that provide price data for DeFi products have gradually become the focus of the industry. Various oracle projects have emerged, among which a unique project called NEST Protocol stands out. It completely places the price formation process on the Blockchain, generating "fact prices" through user participation in "quote mining" and arbitrage games for different trading pairs, thus eliminating reliance on trust in off-chain processes.
The NEST protocol encourages users to participate in bidding through a token incentive mechanism. Bidders can earn NEST tokens or nTokens of specific trading pairs and enjoy weekly ETH revenue distribution. This design not only draws on Bitcoin's POW mechanism but also resonates with the popular "liquidity mining" concept, providing ample motivation for participants.
Most Oracle Machine projects rely on off-chain data acquisition and consensus formation processes, which inevitably introduces a certain trust cost. In contrast, NEST conducts games directly on-chain to form true "price facts" at a low cost. The two main types of participants in the system are quoting miners and validators.
The quoting miner deposits a corresponding proportion of two tokens (such as ETH and USDT) into the NEST contract based on their judgment of a reasonable market price and pays a fee. Each quote has a minimum threshold, currently set at 30 ETH, with a 1% fee required. After quoting, there will be a public announcement period (about 5 minutes) allowing others to challenge. If no one challenges, the price is recognized as the current market price. If someone challenges, they need to provide a larger-scale quote for subsequent verification.
This mechanism greatly reduces the possibility of price manipulation. Correct quotes are rewarded, while malicious quotes suffer losses due to arbitrage. As the liquidity pool expands, the scale effect of NEST will become even more apparent, making the cost of malicious quoting extremely high.
NEST token can not only receive dividends from the fees collected by the system but also plays a more important role in NEST 3.0. For example, when creating or bidding for new ERC20 Token/ETH trading pairs, NEST tokens are required. This design further stimulates market participation.
From the perspective of project valuation, NEST currently has significant room for growth in its market value compared to its potential. With the continuous development of the DeFi sector, NEST is expected to become the preferred solution for more projects.
The token economic model of NEST provides multiple incentives for ecosystem participants. In addition to introducing incentives and game mechanics during the data generation phase, NEST has also designed a unique dividend mechanism for token holders. This not only enhances the motivation of holders to participate in ecosystem development but also makes NEST an attractive long-term investment option.
The revenue of NEST mainly comes from the transaction fees of quoting miners and the usage fees for data calls by downstream applications. All fees are charged and distributed through smart contracts, ensuring transparency throughout the process.
Compared to other cryptocurrencies that lack cash flow support, the stable growth of NEST Protocol's quoted cash flow provides strong support for its price. In addition, the nToken system in the NEST protocol supports quoting for any ERC20/ETH trading pairs, which gives NEST the potential for "infinite deflation." As more valuable projects are integrated and the number of trading pairs increases, NEST tokens will continuously be burned, further enhancing their value.
Although the path for NEST to form "price facts" on the Blockchain is difficult, this trustless approach is likely to become more mainstream with the development of the DeFi ecosystem. With the increasing number of validators and arbitrageurs, the NEST protocol is expected to take a leading position in the Oracle Machine field, and may even achieve a winner-takes-all scenario.
When building an ideal quoting system, the NEST network adheres to the philosophy of "trustless, verify." Only when real on-chain information can still be formed in the harshest environments can it be deemed an excellent Oracle Machine system. NEST is steadily progressing toward this goal and is expected to become an indispensable infrastructure in the DeFi ecosystem.