Innovative Practices in the Oracle Machine Field: The Price Discovery Mechanism of NEST Protocol

In the summer of 1954, computer science pioneer Alan Turing passed away at his home in Manchester, England. As one of the founders of modern artificial intelligence and computer science, Turing's research has had a profound impact. He once envisioned a device that could continuously provide data to computers, but ensuring the authenticity of information and preventing human interference became a significant challenge.

In the field of blockchain, Turing's concept has been explored anew. With the rise of decentralized finance ( DeFi ), "Oracle Machine" that provides price data for DeFi products has gradually become the focus. Among many oracle projects, NEST Protocol stands out by completely conducting the price formation process on the blockchain.

The NEST protocol forms the "actual price" through users participating in "quote mining" and arbitrage games of different trading pairs, without relying on off-chain processes. The system provides token incentives for quoters, and participants can earn NEST tokens or nToken, as well as enjoy regular ETH revenue distribution.

This design is similar to the proof-of-work mechanism of Bitcoin, being simple and reliable, while also drawing on the economic incentive model of "liquidity mining." The NEST Protocol realizes the on-chain completion of the entire process of the Oracle Machine, representing the ideal form in this field.

Unlike other oracles that rely on off-chain gaming systems, NEST conducts price discovery directly on-chain. The main participants in the system include quoting miners and validators. Quoting miners deposit tokens into the contract based on market prices and pay a fee. Quotes are publicized for a certain period and are open to challenges; if no one arbitrages, it is considered a reasonable price.

This mechanism effectively prevents price manipulation, forming "price facts" on-chain throughout the process. Correct quotes will be rewarded, while malicious quotes will incur losses due to arbitrage. As the liquidity pool grows, the scale effect of NEST will make malicious quoting costly, thus achieving true decentralized pricing.

The token economic model of NEST is designed reasonably and has great growth potential. Compared to other Oracle Machine projects, NEST's current market value still has significant room for growth. With the booming development of the DeFi sector, NEST is expected to become the preferred solution for more projects.

Based on the cash flow discount model analysis, the valuation of the NEST token could be 23-33 times its current price. This reflects the potential of NEST and nToken as long-term value-adding assets. Compared to cryptocurrencies that lack cash flow support, the steadily growing quoted cash flow of the NEST Protocol provides strong support for its price.

In addition, the NEST nToken system supports quoting for any ERC20/ETH trading pairs. During the creation and activation process of new trading pairs, NEST tokens will be burned, endowing it with a "deflationary" characteristic. As more quality projects are integrated, the scarcity of NEST tokens will further increase.

Compared to the simple "information flow" Oracle Machine, NEST's path to forming "price facts" on-chain is more challenging. However, in the choice between "trusting data" and "trusting facts", NEST provides a clear answer. By forming prices through real on-chain capital games, NEST has constructed a more reliable pricing mechanism.

With the development of the DeFi ecosystem, the trustless on-chain data generation method like NEST is expected to gain wider application. The project's first-mover advantage may help it form a moat effect in the Oracle Machine track, becoming a leader in this field.

The NEST network practices the philosophy of "not trusting, but verifying." When building the pricing system, NEST assumes the maximum lies and the greatest malice, striving to create real on-chain information even in harsh environments, reflecting the qualities that an excellent Oracle Machine system should possess.