The Legacy of Pioneers in Computer Science and New Explorations in the Blockchain Field

In the summer of 1954, the father of computer science, Alan Turing, passed away at his home in Manchester, England. This genius scientist, who made outstanding contributions to the fields of modern artificial intelligence and computer science, ended his life in a tragic manner. In honor of this remarkable individual, one of the highest honors in the computer field is named the "Turing Award."

In Turing's research, there is an interesting concept: a box that can continuously provide data to computers. While data input is relatively simple in centralized systems, ensuring the authenticity of the information and preventing human intervention has become a technical challenge.

In the pursuit of "information authenticity" in the blockchain world, people have begun new explorations of the Turing experiment. With the booming development of decentralized finance (DeFi), the "oracle" technology that provides price information for DeFi products has transitioned from niche to mainstream, gradually gaining widespread attention from the crypto community.

Currently, the oracle projects are flourishing, each with its own characteristics. Among them, the NEST Protocol adopts a unique approach by placing the price formation process entirely on the Blockchain. By allowing users to participate in "quote mining" and arbitrage games across different trading pairs to form the "fact price," it eliminates the trust costs associated with off-chain processes. In the NEST system, the "miners" of quotes can receive generous token rewards, including NEST tokens and nTokens for different trading pairs. Participants can also share the ETH earnings generated from ecological development every week.

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

Potential Value in the Oracle Domain

Most oracle designs rely on independent off-chain game systems that provide data and form consensus through an off-chain node network. This approach has a certain trust cost, as users must trust the off-chain data acquisition process. Therefore, many oracle projects are striving to ensure the authenticity of off-chain network data and node credibility through complex mechanism designs.

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

The quoting miner deposits a certain proportion of two tokens (such as ETH and USDT) into the NEST contract based on what they believe to be a reasonable market price and pays a handling fee. Currently, the minimum quoting unit is 30 ETH, and a 1% handling fee is required.

After the user completes the quotation, the price will be publicly announced and open for challenge within approximately 5 minutes. If there are no arbitrageurs taking advantage of the price during this period, the price is considered reasonable and can be regarded as the current market price. Otherwise, the price will be corrected by the arbitrageurs. Arbitrageurs are also required to provide a quote that is double the size of the eat single capital for subsequent arbitrageurs to challenge.

This mechanism of price discovery through actual funds can effectively prevent price manipulation, forming "price facts" entirely on-chain. Data users can see the entire process without needing to trust the data source. Accurate quotes will be rewarded, while malicious quotes will lose funds 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.

In addition, NEST token holders can regularly receive dividends from the fees collected by the system. In the NEST 3.0 version, NEST tokens play a more important role in creating and bidding for new ERC20 Token/ETH trading pairs, thereby incentivizing market participation.

Discounted Cash Flow Model Estimated Value

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

NEST not only introduces incentive and game theory mechanisms during the data generation phase but also has a unique incentive design 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 dividend mechanism increases the motivation for token holders to participate in ecological construction.

Currently, the income from NEST and nToken mainly comes from the transaction fees of quoting miners and the usage fees for data calls from downstream applications. All fees are collected and distributed by smart contracts, ensuring complete transparency throughout the process.

By analyzing historical data and using a cash flow discount model, the valuation of the NEST token can be determined. Assuming that NEST's weekly earnings maintain linear growth over a period of 5 years, with a weekly increase of 138 ETH. The perpetual time after 5 years is the second phase, where the growth rate of NEST's earnings decreases to 0. Setting the discount rate at 7%-10%, the current valuation of NEST is approximately 0.0035-0.005 ETH.

As of October 7th, the data shows that the current price of NEST is approximately 0.000151 ETH, which implies a valuation that is 23-33 times the current price. This indicates that both NEST and nToken have long-term growth potential, and the steadily growing quoted cash flows provide effective support for their prices.

On the other hand, the nToken system in the NEST protocol supports quotes for any ERC20/ETH trading pairs. When a new oracle trading pair is successfully auctioned and activated, the funds participating in the auction will be permanently destroyed. This mechanism gives NEST the potential for "infinite deflation"; as more valuable projects are integrated and trading pairs increase, NEST tokens will continue to be destroyed, further enhancing their value.

Build New Infrastructure for DeFi

Compared to simple "information flow" oracles, NEST faces a more difficult path in forming "price facts" on-chain. Most oracle systems choose a lower-threshold consensus model for rapid expansion. However, on the issue of whether to "trust data" or "trust facts", NEST clearly has its own answer.

By quoting based on the actual funds of on-chain miners, a sandbox quoting market is formed, incentivizing validators (arbitrageurs) to continuously correct the data, making it the real price. As the quoting market flourishes, the entire NEST protocol ecosystem will become even stronger. However, the information-driven oracle field may experience fierce competition due to low entry barriers, and the emergence of malicious projects may reduce people's trust in "price information."

NEST chooses to generate real data on-chain in a decentralized manner. This trustless approach will 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 the project will continue to rise. The first-mover advantage of the NEST protocol is expected to secure an important position in the oracle field.

The crypto community has a saying: "Don't trust, verify." NEST Network is a practitioner of this philosophy. When building a "perfect" pricing system, NEST assumes it is facing the most lies and the greatest malice. Only by forming real on-chain information in such a harsh environment can it be considered an excellent oracle system.