The Maverick in the Oracle Machine Track: NEST Protocol

In the summer of 1954, in a house in Manchester, England, computer science pioneer Alan Turing tragically passed away after consuming an apple laced with cyanide. This genius, who made significant contributions to modern artificial intelligence and computer science, ended his legendary life in a tragic manner. To commemorate this outstanding scientist, the "Turing Award" was established in the field of computing to honor individuals who have made exceptional achievements in the area.

In Turing's research, there was an idea: a box exists in the world that can continuously provide data to computers. In centralized systems, obtaining information is not difficult, but how to verify the authenticity of the information and prevent human intervention has become a technical challenge.

In the pursuit of "information authenticity" in the blockchain field, people have begun new explorations of the Turing experiment. With the booming development of decentralized finance (DeFi), the "Oracle Machine" that provides price information for DeFi products has transformed from niche to mainstream, gradually entering the sight of cryptocurrency community users.

Today, Oracle Machine projects are flourishing, each with different mechanisms. The NEST Protocol takes a unique approach by placing the price formation process on the blockchain, creating "fact prices" through user participation in different trading pairs via "quotation mining" and arbitrage games, eliminating the trust cost associated with off-chain processes. In the NEST protocol, the system provides ample token incentives for "miners" who make quotes, allowing quoters to earn ETH revenue distribution weekly and share in the profits brought by ecological development.

The "quote mining" of NEST Protocol has the simplicity and reliability similar to Bitcoin's POW, and its token economic mechanism parallels the currently popular "liquidity mining," providing sufficient incentives for every participant. It can be said that the NEST Protocol, which completes all aspects of oracle work on-chain, is the ideal form of an Oracle Machine.

Value Lows in the Oracle Machine Field

There are various implementation methods for Oracle Machines, most designs rely on independent off-chain game systems, providing data through an off-chain node network and returning it on-chain after consensus is formed. This type of Oracle Machine has certain trust costs, and users must trust the process of obtaining data off-chain. Therefore, most Oracle Machine projects are dedicated to ensuring the authenticity of off-chain network data and the trustworthiness of nodes through mechanism design, but often the mechanisms are complex and uncontrollable.

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

Quote miners deposit a certain amount of two tokens, such as ETH and USDT(, into the NEST contract at a market price they consider reasonable, proportionally, and pay a handling fee. There is a minimum threshold for quoting, and the current minimum quoting unit is 30 ETH. A handling fee of 1% must be paid to participate in the quoting.

After the user completes the quotation, the price will be announced for a period of time and open to challenges, currently set at 25 blocks ) about 5 minutes (. If there are no arbitrageurs taking advantage of the price within this period, it is considered reasonable and can be viewed as the current market price. Otherwise, the price will be corrected to the market price by arbitrageurs. Arbitrageurs also need to provide a quote that is twice the size of the funds used for the taker order, for subsequent arbitrageurs to challenge.

This mechanism of price discovery through "real money" can largely prevent price manipulation, forming "price facts" entirely on-chain. Data callers can see the entire process without needing to trust the data source. Correct quotes will be incentivized, while malicious quotes will lose funds due to arbitrage. As the liquidity pool grows, and the scale effect of NEST becomes apparent, the cost of malicious quoting will be extremely high and will be corrected by the entire market. Therefore, compared to trusting certain nodes' off-chain data, the prices formed on-chain are the true decentralized facts.

In addition, the NEST token can periodically receive dividends from the fees collected by the system and will play a more important role in NEST 3.0. For example, when creating and bidding for any new ERC20 Token/ETH trading pair, both the creator and bidders need to use NEST tokens. Participants who bid but do not succeed in the auction can even get back more than they bid, thus encouraging market participation.

A horizontal comparison of the entire track reveals that NEST's current position does not match its value. A rich and well-developed token economy gives it considerable growth potential.

In terms of project valuation, the Oracle Machine track is currently dominated by one player. As of September 29, the leading project has a circulating market cap of 3.4 billion USD, which is 48 times that of NEST. As the proposer and practitioner of the "price oracle" solution, NEST has enormous room for value appreciation. With the vigorous development of the entire DeFi field, NEST will also become the choice solution for more projects.

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Token Economic Model Demonstrates Growth Potential

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

In addition to introducing incentives and game mechanics during the data generation phase, NEST has a unique incentive design for token holders. Currently, holders of NEST and nToken can deposit their tokens into a contract and receive the ETH earnings of the system for that week.

This adds a dividend mechanism outside of governance for NEST, providing token holders with greater motivation to participate in ecological construction and attracting more people to engage with and use NEST.

The current sources of income for NEST and nToken mainly include: the transaction fees of quote miners and the data usage fees paid by downstream applications for calling data. All fees charged and distributed are completed by smart contracts, ensuring full transparency throughout the process.

Using historical data, the cash flow discount model is used to value the NEST token. The free cash flow discount ) DCF ( valuation model is a fundamental and reliable absolute valuation method. Considering the specific business situation of NEST, it is suggested to use a two-stage free cash flow discount model to value NEST, first predicting the growth of NEST's free cash flow and providing the cash flow growth rates for the first and second stages.

The expected future cash flow can be calculated from the growth rate. Discounting the cash flow back to the current date gives the present value of NEST )PV(. To discount the cash flow, an expected discount rate needs to be provided. We believe that choosing the savings rate of ETH as the discount rate is appropriate, with the current savings rate of ETH being around 7%.

Weekly data shows that NEST's weekly earnings have grown by approximately 138)ETH(. Assuming that the weekly earnings of NEST maintain linear growth in the first phase for 5 years, with a weekly increase of 138)ETH(. In the perpetual time after 5 years, the growth rate of NEST's earnings decreases to 0, with a discount rate set at 7%, the current valuation of NEST is 0.005ETH, and with a discount rate of 10%, the current valuation of NEST is 0.0035ETH.

According to data from October 7, the current NEST price is approximately 0.000151 ETH, which means the valuation is 23-33 times the current price.

It can be seen that both NEST and nToken are valuable assets with long-term growth potential. Compared to other cryptocurrencies that lack cash flow support, the steadily growing quoted cash flow of the NEST Protocol provides very effective support for its price.

On the other hand, the nToken system in the NEST protocol supports quoting for any ERC20/ETH trading pairs, allowing users to initiate the creation of Oracle Machine trading pairs, which then enter the auction process. When the Oracle Machine is successfully auctioned and activated, the funds that participated in the bidding will be sent to a black hole address for permanent destruction.

Therefore, the nToken system somewhat grants NEST the possibility of "infinite deflation." As more valuable projects are integrated and trading pairs increase, NEST tokens will continue to be destroyed, and the deflation in quantity will enhance the token's value.

Building New Infrastructure for DeFi, NEST May Become the Winner

Compared to the simple "information flow" Oracle Machine, NEST's establishment of "price facts" on-chain is a challenging path. Most Oracle Machine systems have chosen lower-threshold consensus models for rapid expansion. However, on the issue of whether to "trust data" or "trust facts", NEST clearly has its own answer.

Bidding with "real gold and silver" from on-chain miners creates a sandbox bidding market. Driven by interests, validators ) and arbitrageurs ( will continuously adjust the data to reflect true prices. As the bidding market thrives, the entire NEST protocol ecosystem will become stronger. The field of information-driven Oracle Machines will form a red ocean due to low entry barriers, and the emergence of malicious projects during competition will reduce people's trust in "price information."

It is not about moving data onto the chain, but about generating real data in a decentralized manner on the chain. This trustless approach will certainly become more scalable with the development of the DeFi ecosystem, which in turn can further enhance the efficiency and accuracy of the data, creating a positive feedback loop. As the number of validators and arbitrageurs increases, the transfer costs of projects will continue to rise. The NEST protocol, which has a first-mover advantage, is even expected to create a winner-takes-all situation and become a new benchmark in the Oracle Machine track.

There's an important saying in the crypto community: "Don't trust, verify" ) Don't trust, verify (." The NEST network is clearly a practitioner of this phrase. When building a "perfect" quotation system, imagine that you are facing the most lies and the most malice. Only in such a harsh environment, can still form real on-chain information, is an excellent oracle system.

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