Total value secured (TVS), which aims to track the adoption of oracle networks by measuring how much value is secured by a particular provider, has long been the most-used key performance indicator for the middleware technology that supplies external data from the real world, such as the prices of assets, to blockchains.
However, Blockworks Research published on Thursday a research report that criticized TVS as a metric for assessing oracles, in favor of a new metric called total transaction value (TTV), “which is more strongly correlated to [the] frequency of oracle price updates and therefore oracle revenue.” Per the report, TTV is calculated by aggregating the volume of derivatives DEXes that depend on oracle price data.
Chainlink currently leads all oracle providers in terms of TVS, securing over $22.7 billion, but the analysis found that, using the new metric of TTV, Pyth takes the top belt in market share.
The report, which was funded by the Pyth Data Association, a Swiss entity founded by participants of oracle network Pyth, has sparked contention among key players in the decentralized finance (DeFi) ecosystem.
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The author, Blockworks research manager Ryan Connor, argued total value secured is not an effective statistic for evaluating oracle demand or gauging market share. “Oracles are assessed by DeFi teams on their ability to service activity, and oracles get paid by protocols as a function of the amount of activity they secure, not as a function of the size of the asset pool,” Connor wrote. As a result, “we see TVS as overstating the importance of asset pool size, and greatly understating oracle activity.”
While the publication emphasized TTV as a better metric, Chris Hermida, the co-founder of oracle network Switchboard and partner of investment firm Manna, noted that gauging the adoption of oracles shouldn’t be dependent on a single variable. “There is no one size fits all metric, its [sic] better to look holistically including TVS, TTV, # of transactions, net oracle networks fees paid on chain, etc,” Hermida indicated.
Pushing Back Against Total Transacted Value (TTV)
Blockworks Research’s support of TTV over TVS has triggered several people to chime in, by defending the use of TVS, attacking TTV, and emphasizing how a different existing metric is better than TTV.
“Total Value Secured (TVS) is a metric that measures how much economic value an oracle secures and thus conversely how much could be lost/stolen if the oracle were to be corrupted,” wrote Chainlink community liaison Zach Rynes, who goes by the handle @ChainLinkGod. “It’s a measurable signal of security and trust by dApps/users, which is difficult to manipulate due to the capital required, very far from a useless metric,” Rynes said on Thursday, adding that the “Pyth-funded report is just a thinly veiled hit piece attempting to discredit Chainlink’s adoption.”
Oracles, as an important piece of blockchain infrastructure, especially in the decentralized finance ecosystem, enable smart contracts to interact with information found outside of blockchains. When oracles provide inaccurate information or are manipulated, the consequences can be far-reaching. “Imagine you’re a protocol picking an oracle, if that oracle fucks up all your [total value locked] gets drained, all your users lose money and your protocol becomes worthless,” said DefiLlama’s pseudonymous developer who goes by @0xngmi on X.
One example of how an unsound oracle can hurt users is the infamous 2022 Mango Markets exploit when Avi Eisenberg manipulated the protocol’s oracle mechanics to wildly skew a price, which then allowed him to extract around $110 million from the project. As a result, Mango Markets has not only struggled to recover from the substantial exploit, but Eisenberg was also convicted after a Manhattan jury found him guilty of fraud and market manipulation.
While acknowledging the potential of another metric to measure oracle demand, Rynes says total transaction value (TTV) proposed by Blockworks Research “is misleading because there’s nothing ‘total’ about it, it’s scoped to only looking at derivatives exchange volume.”
Plus, Rynes points to Chainlink’s transaction value enabled (TVE) as a superior metric to total transaction value (TTV), since the former tracks the total US dollar volume of transactions dependent on Chainlink oracles, including trading, lending, rebalancing automated yield farming and stablecoin minting.
Conflict of Interest Sparks Criticism
In response to the findings, Hugo May, lead governance researcher at blockchain services firm Lemma said on X, “Paid research is difficult. Blockworks [Research is] getting a lot of flak for a paid report that puts Pyth above Chainlink in terms of a new metric. One that seems far more applicable to Pyth.”
A number of observers took issue with how the Blockworks Research report was funded by Pyth. Under Blockworks’ tweets showcasing the report, @CatfishFishy commented, “Your thread should include the fact that this is paid for by Pyth; not have it hidden inside the report itself.”
Another user @acomg2005 wrote, “You forget the most important section: [conflict] of interest,” while @stabiliseret said, “This is a disgrace. It is not research but just marketing for Pyth. You had a million watts to make this meaningful and educational but you choose the easy way.”
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Sreeram Kannan, the co-founder of restaking giant EigenLayer, compared the ongoing contention between total value secured versus total transaction value as the same debate between total value locked versus transaction volume. “Neither captures the full picture but the former is much more robust against permissionless games.”
Stani Kulechov, the founder of dominant lending protocol Aave, which uses Chainlink services, noted that, “TVL is actually a great metric on asset allocation category, don’t get fooled by folks that want to create a new metric for the sake of a metric.”
