The blockchain oracle business model is an essential component of the infrastructure for decentralised finance (DeFi) and other decentralised applications (dApps). Oracles are services that enable blockchains to receive external information (off-chain data), such as asset prices, sports results, weather data, or any other information needed for smart contracts to function properly. However, beyond their technical function, oracles adopt a variety of business models that influence their adoption and profitability.
Basic model: Selling data to decentralised applications The main business model for oracles is based on selling data from external providers to decentralised applications. This allows smart contracts to execute operations based on reliable data from the outside world. This revenue stream is the cornerstone of the business model of leading oracles such as Chainlink and Pyth. Cryptographic application developers pay for access to this data, either through micropayments for each data call or via subscriptions for ongoing services.
Chainlink: A dominant but focused leader Of all the oracles, Chainlink is arguably the largest and best known. It offers a wide range of services, from price feeds to interoperability tools between blockchains. However, despite this diversity of services, 98% of its revenue comes from price feeds. These feeds are essential for DeFi platforms, stablecoins, and other applications where real-time data on digital assets is crucial.
Since the beginning of 2024, Chainlink has generated $46 million in revenue, primarily from its data feed services. However, this focus on price feeds raises questions about the long-term sustainability of this model. With the rise of other oracle solutions and competitors offering alternatives, Chainlink could face pressure to diversify its revenue streams.
CCIP and the prospects for diversification To meet these challenges, Chainlink is banking on CCIP (Cross-Chain Interoperability Protocol), a solution for interoperability between blockchains. CCIP enables blockchains to communicate and exchange data and assets, which could open up new sources of revenue. If major tokens adopt this standard, such as the GHO stablecoin recently launched by Aave, Chainlink could see its revenues grow and diversify. CCIP could become a key part of the infrastructure for the next generation of blockchains, particularly in a multi-chain world.
Chainlink revenues - Source: @Linkpool / Dune Pricing models: pull, push, and native token fees Another key aspect of the oracle business model is how they price their services. Chainlink uses a so-called "pull" pricing model, charging 0.35 cents per use. Users who pay with Chainlink's native token, LINK, are charged a standard rate, while those who pay with other cryptocurrencies are charged a 10% surcharge. This model provides an incentive to use the LINK token, creating additional demand for the token and embedding its use into the oracle system.
In contrast, newer oracles such as Pyth are adopting more aggressive pricing strategies to capture market share. Pyth charges the smallest unit of a blockchain, for example 1 wei on Ethereum, for each use. This low-price model, which is almost negligible for users, aims to attract customers while offering them ultra-competitive pricing. This allows Pyth to gain ground against Chainlink and other competitors before eventually increasing its pricing as its user base grows.
Differences in data provenance Oracles differ not only in their pricing models, but also in how they obtain their data. This has a direct impact on the quality and reliability of the information provided to dApps.
Pyth sets itself apart by using data directly provided by leading exchanges and financial institutions such as Flow Traders, Jane Street, and CBOE. This data comes from the major players in the market, which guarantees high reliability, essential for critical applications such as algorithmic trading or DeFi protocols. Chainlink, meanwhile, relies on third-party data aggregators such as CCData, CoinMarketCap, and CoinGecko to provide the majority of its price data. While this method allows for the collection of information from multiple sources, it is more dependent on the quality of the data aggregators, which can sometimes lead to discrepancies with the raw data provided directly by the exchanges. Data provider remuneration model The oracle business model is not limited to the sale of data to end users; it also includes remuneration for data providers. This dynamic is essential to ensure the continued supply of reliable data.
Pyth, for example, sets aside 22% of total PYTH tokens to remunerate its data providers. This incentive remuneration mechanism encourages financial institutions and other providers to continue to supply accurate, real-time data. In this way, Pyth ensures the loyalty and commitment of its sources, which is crucial to the smooth running of its network.
Tokenomics model and its importance Blockchain oracles, such as Chainlink and Pyth, use sophisticated tokenomics models that play a key role in their business model. Native tokens, such as LINK for Chainlink and PYTH for Pyth, are used not only as a means of payment, but also to align incentives between different players in the ecosystem, be they data providers, operator nodes or end users.
In the case of Chainlink, the use of LINK to pay for oracle services is built into the system, incentivising users to adopt the token to benefit from tariff discounts. This sustained demand for LINK creates pressure on supply, helping to maintain or increase the value of the token on secondary markets.
The future of oracles and business models The future of blockchain oracles looks promising, but their business model will need to adapt to an ever-changing environment. With the rise of cross-chain solutions such as Chainlink's CCIP, the growing adoption of stablecoins, and the development of new decentralised platforms, oracles will need to diversify their offerings and find new sources of revenue. In addition, the rise of decentralised oracles, where users themselves can contribute data and participate in the network, could disrupt the current business model.
Finally, emerging regulations around cryptocurrencies and decentralised finance will also have an impact on the oracle business model. Oracles may have to comply with stricter rules around data transparency, which could mean additional costs to ensure compliance while providing reliable data to users.
