Oracle Machine Project NEST Protocol: Pioneer of on-chain Price Discovery

In the summer of 1954, computer science pioneer Alan Turing passed away at his home in Manchester, England, after consuming a cyanide-laced apple. This genius, who made significant contributions to the field of artificial intelligence and computer science, tragically ended his extraordinary life. To commemorate this outstanding scientist, the highest honor in the computer field is named the "Turing Award."

Turing once envisioned a magical box that could continuously provide data to computers. In centralized systems, inputting information is not difficult, but ensuring the authenticity of the information and preventing human intervention is a significant challenge.

The blockchain space has been exploring new ways to realize the Turing concept. With the rise of decentralized finance (DeFi), "Oracle Machines" that provide price data for DeFi projects have also moved from niche to mainstream.

Currently, the Oracle Machine projects are flourishing, each with its own characteristics. The NEST Protocol takes a unique approach by placing the price formation process entirely on-chain, forming "actual prices" through user participation in "quote mining" and arbitrage games in different trading pairs, without relying on off-chain processes. The NEST system incentivizes user participation in quoting through token rewards, allowing quoters to earn NEST tokens or nToken, and share ETH profits weekly.

The "quote mining" of the NEST Protocol is similar to Bitcoin's POW, being simple and reliable. Its token economic mechanism is also similar to the currently popular "liquidity mining," which can fully incentivize participants. It can be said that the NEST Protocol has completed the entire process of the Oracle Machine on-chain, making it an ideal form of the Oracle Machine.

Potential Stocks in the Oracle Machine Field

Most Oracles rely on independent off-chain systems to provide data and form consensus through an external node network. This approach has a certain trust cost, as users must trust the off-chain data acquisition process. Therefore, many projects are dedicated to designing complex mechanisms to ensure the authenticity of off-chain network data and the credibility of nodes.

The NEST protocol conducts games directly on-chain, forming a true "price fact." In the system, "price facts" are mainly generated by two types of participants: quote miners and validators.

The quoting miner deposits a certain amount of two tokens such as ETH and USDT into the NEST contract at a reasonable market price determined by their own judgment, and pays a handling fee. Currently, the minimum quoting unit is 30 ETH, and a 1% handling fee is required.

There will be a public announcement period of about 5 minutes after the quote to accept challenges. If there are no arbitrageurs, the price is considered reasonable; otherwise, it will be corrected to the market price by the arbitrageurs. Arbitrageurs also need to provide a new quote that is double the amount of the eating order funds for subsequent arbitrageurs to challenge.

This mechanism of price discovery using "real money" can effectively prevent manipulation and creates "price facts" throughout the entire process on-chain. Data users can see the whole process without needing to trust the data source. Correct pricing will receive incentives, while malicious pricing will incur losses due to arbitrage. As the liquidity pool increases and the scale effect of NEST becomes apparent, the cost of malicious pricing will become extremely expensive. Compared to trusting off-chain data from certain nodes, the prices formed on-chain are truly decentralized facts.

In addition, NEST token holders can regularly receive system fee dividends and play a more important role in NEST 3.0. When creating and bidding for new ERC20 Token/ETH trading pairs, NEST must be used; unsuccessful bidders can even get back their funds in excess, thus incentivizing market participation.

Looking at the entire track, NEST's current position does not match its value. Its well-developed token economic model gives it significant growth potential. From the perspective of project valuation, the market capitalization of leading Oracle Machine projects is several times that of NEST. As a practitioner of the "price fact" solution, NEST still has huge room for growth. With the flourishing development of DeFi, NEST is expected to become the choice for more projects.

Token Economic Model Analysis

The token economic model is an important criterion for measuring the development potential of a project. A diversified incentive model can provide positive feedback to ecosystem participants from multiple perspectives, stimulate the prosperity of the secondary market, and become a long-term stable investment solution.

In addition to introducing incentives and game mechanics during the data generation phase, NEST has also designed unique incentives for token holders. NEST and nToken holders can deposit their tokens into the contract and receive system ETH earnings weekly.

This dividend mechanism incentivizes token holders to participate in ecological construction. Currently, the earnings from NEST and nToken mainly come from the fees charged by quoting miners and the data usage fees of downstream applications. All fee collection and distribution are completed by smart contracts, ensuring openness and transparency.

According to historical data, the cash flow discount model is used to value the NEST token. Assuming that NEST's weekly revenue maintains linear growth and the growth rate drops to 0 after 5 years, with a discount rate set at 7%-10%, the current valuation of NEST is approximately 0.0035-0.005 ETH, which is 23-33 times the current price.

It can be seen that both NEST and nToken have long-term growth potential. Compared to cryptocurrencies lacking cash flow support, the steadily growing quoted cash flow of the NEST Protocol provides strong support for its price.

On the other hand, the nToken system in the NEST protocol supports quoting for any ERC20/ETH trading pairs. Users can create Oracle Machine trading pairs and conduct auctions, and once successfully activated, the auction funds will be permanently destroyed. This gives NEST the potential for "infinite deflation." As more high-quality projects are onboarded and trading pairs increase, NEST tokens will continue to be destroyed, and the deflationary effect will enhance the token's value.

Building New Infrastructure for DeFi, NEST May Become the Winner

Compared to the simple approach of "information flow" by Oracle Machines, NEST faces a more challenging path in forming "price facts" on-chain. Most Oracle Machines choose a consensus model with lower thresholds for rapid expansion. However, regarding the question of whether to "trust data" or "trust facts," NEST provides its own answer.

Through the on-chain real fund quotes from miners, a sandbox quote market is formed. Driven by interests, validators ( and arbitrageurs ) will continuously correct the data to bring it closer to the real price. As the quote market thrives, the NEST protocol ecosystem will become stronger. However, the information-importing Oracle Machine, due to its low threshold, may form a red ocean, and the emergence of malicious projects may reduce people's trust in "price information."

Generating real data in a decentralized manner on-chain, this trustless approach will scale with the development of the DeFi ecosystem, which in turn can enhance data efficiency and accuracy, forming a positive feedback loop. With the increase of validators and arbitrageurs, the cost of project transfer continues to rise, and the NEST protocol, with its first-mover advantage, is expected to create a winner-takes-all situation and become a new benchmark in the Oracle Machine field.

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