The Legend of Computer Science Pioneers and the Innovation of Oracle Machine

In the summer of 1954, the father of computer science, Alan Turing, passed away at his home in Manchester, England, after consuming an apple laced with cyanide. This genius, who made pioneering contributions to the fields of artificial intelligence and computer science, ended his legendary life in a tragic manner. In honor of this outstanding scientist, an important award named after him has been established in the computer community to recognize individuals who have made exceptional contributions in the field of computing.

In Turing's research, there is an interesting idea: what if there exists a device that can continuously provide data to computers? In centralized systems, inputting information is not difficult, but ensuring the authenticity of information and preventing human intervention has become a technical challenge.

The rise of blockchain technology provides new ideas for solving this problem. With the rapid development of decentralized finance (DeFi), the "Oracle Machine" technology that provides price data for DeFi products has moved from niche to mainstream, attracting widespread attention from the crypto community.

Currently, Oracle Machine projects are flourishing with their unique characteristics. Among them, NEST Protocol adopts a unique approach by placing the price formation process directly on the blockchain. It forms a "factual price" through user participation in "quote mining" and arbitrage games across different trading pairs, thus eliminating the trust cost associated with off-chain processes.

The NEST protocol provides generous token incentives for quote "miners". Users participating in the ETH-USDT trading pair quotes can earn NEST tokens, while users participating in quotes for other trading pairs can earn corresponding nTokens. These token holders can receive ETH profit distributions weekly, sharing the dividends brought by ecological development.

The "quote mining" mechanism of the NEST Protocol is similar to Bitcoin's proof of work ( POW ), which is concise and reliable. At the same time, its token economic model resonates with the currently popular "liquidity mining", providing ample incentives for each participant. It can be said that the NEST Protocol demonstrates the ideal form of oracle technology by completing all work processes of the oracle on-chain.

Most Oracle Machine systems rely on independent off-chain game mechanisms, providing data through an off-chain node network and returning it on-chain after reaching consensus. This approach carries a certain trust cost, as users must trust the off-chain data acquisition process. Therefore, many Oracle Machine projects are dedicated to ensuring the authenticity of off-chain network data and the credibility of nodes through complex mechanism designs.

The NEST protocol takes a different approach by directly conducting games on the chain to form real "price facts". In this system, the generation of "price facts" mainly relies on two types of participants: quote miners and validators.

The quoting miner deposits a certain amount of two types of tokens (such as ETH and USDT) into the NEST contract based on what they consider a reasonable market price, and pays a fee. There is a minimum threshold for quoting, with the current minimum quoting unit being 30 ETH, and a 1% fee is also required.

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

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

The NEST token can also regularly 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 on any new ERC20 Token/ETH trading pair, both the creator and the bidder need to use the NEST token. Participants who do not win the bid can even get back their bidding funds in excess, thereby encouraging market participation.

However, when we make a horizontal comparison across the entire track, we find that NEST's current market position does not seem to fully reflect its true value. Its rich and well-developed token economic model gives it enormous growth potential.

In terms of project valuation, the current Oracle Machine sector shows a situation where one company dominates. As of the data on September 29, the circulating market value of the leading project LINK reached 3.4 billion USD, which is 48 times that of NEST. As the proposer and practitioner of the "price fact" solution, NEST has enormous potential for growth. With the booming development of the entire DeFi sector, NEST is expected to become the preferred solution for more projects.

The token economic model is a key indicator for assessing the development potential of a project. A diversified incentive model can provide positive feedback for ecological participants from multiple perspectives. These incentive mechanisms not only promote the prosperity of NEST in the secondary market but may also become a long-term stable investment choice for users.

In addition to introducing incentives and game mechanisms during the data generation phase, NEST has also designed a unique incentive plan for token holders. Holders of NEST and nToken can deposit their tokens into the contract and receive the system's ETH earnings for the week.

This design adds a dividend mechanism outside of governance, incentivizing token holders to participate more actively in ecological construction and attracting more people to join and use the NEST system.

Currently, the revenue of NEST and nToken mainly comes from the transaction fees of quoting miners and the usage fees paid when downstream applications call data. All fees are collected and distributed through smart contracts, ensuring full transparency throughout the process.

Professionals have used the discounted cash flow model to value the NEST token. Free cash flow discounting ( DCF ) is a fundamental and reliable absolute valuation method. Considering the specific business circumstances of NEST, a two-stage free cash flow discount model was used for valuation, first predicting the growth of NEST's free cash flow and providing the cash flow growth rates for the first and second stages.

Based on the growth rate, the expected future cash flows can be calculated. Discounting the cash flows to the current date gives the present value of NEST (PV). The choice of discount rate is crucial; considering the characteristics of the industry, it is reasonable to choose the savings rate of ETH (approximately 7%) as the discount rate.

Weekly data shows that NEST's weekly revenue has increased by approximately 138(ETH). Assuming that the weekly revenue of NEST maintains linear growth during the first phase for 5 years, with a weekly increase of 138(ETH). After 5 years, the perpetual period of the second phase will see NEST's revenue growth rate drop to 0. With a discount rate of 7%, NEST's current valuation is approximately 0.005ETH; with a discount rate of 10%, the valuation is approximately 0.0035ETH.

According to data from October 7, the current price of NEST 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 strong support for its price.

On the other hand, the nToken system in the NEST protocol supports quotes for any ERC20/ETH trading pairs. Users can 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 participating in the bidding will be permanently destroyed.

This mechanism grants NEST the potential for "infinite deflation" to a certain extent. As more quality projects are integrated and trading pairs increase, NEST tokens will continuously be burned, and the reduction in quantity will also enhance the value of the tokens.

Compared to the simple "information flow" of the Oracle Machine, NEST's path to forming "price facts" on-chain is not smooth. Most Oracle Machine systems choose lower-threshold consensus models for rapid expansion. However, regarding the question of whether to "trust data" or "trust facts," NEST clearly has its own unique answer.

By quoting based on the actual funds of on-chain miners, a sandbox quotation market is formed. Driven by interests, validators (arbitrageurs) will continuously correct the data to reflect real prices. As the quotation market thrives, the entire NEST protocol ecosystem will become more robust. In contrast, the information-importing Oracle Machine field has formed a red ocean due to its low entry barrier, and the emergence of malicious projects during the competition may undermine people's trust in "price information."

It is not about moving data onto the chain, but rather generating real data in a decentralized manner on the chain. This trustless approach will inevitably scale with the development of the DeFi ecosystem. Conversely, this can further enhance the efficiency and accuracy of 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, with its first-mover advantage, may even create a winner-takes-all situation, becoming a new benchmark in the Oracle Machine space.

There is an important saying in the crypto community: "Don't trust, verify." NEST Network is clearly a practitioner of this philosophy. When building a "perfect" quoting system, one must assume that they are facing the greatest lies and the most malicious intent. Only if real on-chain information can still be formed in such a harsh environment can it be considered an excellent Oracle Machine system.