Plug In With Switchboard | ep. 41

Introduction to Switchboard and Oracle Networks

Switchboard is a pioneering oracle network that has been operating on the Solana blockchain since April 2021. As explained by Dr. Blox (Mitch), the CTO and co-founder of Switchboard, the platform offers a unique approach to oracle services by allowing users to create customizable data feeds. This flexibility sets Switchboard apart from other oracle protocols that typically provide a fixed set of data feeds.

Top Projects

Lulo

Score: 7,586.13

Bonk

Score: 4,806.12

Sphere

Score: 2,544.42

Moonwalk

Score: 2,026.11

Oracles play a crucial role in the decentralized finance (DeFi) ecosystem by providing external data to blockchain networks. They serve as a bridge between off-chain data sources and on-chain smart contracts, enabling various DeFi applications such as lending platforms, perpetual futures markets, and more. Switchboard's oracle network currently secures around $4-5 billion in Total Value Locked (TVL), highlighting its significant impact on the Solana ecosystem.

The Importance of Oracles in DeFi

Dr. Blox emphasized the critical role of oracles in securing DeFi protocols:

"Oracles are so important. They secure so much volume on so much of DeFi. Switchboard is a platform that you can actually create your own oracles rather than just using this strict data set these other oracle operators provide."

This customization allows DeFi platforms to tailor their risk profiles and ensure they are using the most relevant and reliable data sources for their specific needs. For example, a platform might choose to source prices exclusively from Binance if they believe it represents the most liquid and accurate market for a particular asset.

Customizing Data Feeds with Switchboard

One of Switchboard's key features is the ability for users to customize their data feeds. This level of flexibility allows DeFi platforms to create oracles that match their specific requirements and risk tolerances. Dr. Blox provided an example:

"If you want to get the price of SOL, you can really customize the source that you're getting the price from. So there's platforms that you can get on-chain. Let's say there's a Raydium stable pool that you could say, 'Oh, this pool has SOL-USDC,' and maybe that has a lot of liquidity. Maybe it does not. Do we want to include that in our pricing algorithm?"

This customization extends to filtering out low-liquidity sources, combining multiple data sources, and even implementing safeguards against price divergences. For instance, a platform could choose to halt operations if there's a significant discrepancy between two trusted price sources, ensuring the integrity of their pricing data.

Switchboard's Security Model

Switchboard employs a robust security model to ensure the reliability and accuracy of its oracle network. When a user requests a data feed update, they provide a hash of the data they want processed. The oracle then maps this to the complete data set, fetches the required information, and performs the necessary operations.

Dr. Blox explained the process:

"The Oracle once it has all this data will actually take the hash of that sign it with the latest block hash or slot hash so we can prove the time the price is produced and return that back. Then on-chain, you actually have in the signature the hash of the data that was processed, the hash of the workflow that the Oracle actually did and the slot hash."

This approach allows for on-chain verification of the work performed by the oracle and the timing of the price production, enhancing the overall security and transparency of the system.

Latency and Oracle Performance

One of the key advantages of Switchboard's oracle network is its low latency. Unlike some other oracle protocols that use a push model to update prices constantly, Switchboard employs an on-demand model. This approach allows for significantly faster response times, with Dr. Blox stating:

"The average for our benchmarks is between 300 to 400 milliseconds. Actually, this is very fast. So reference the speed of light around the earth is about 181 milliseconds. So you can do the math there. It's very, very, very fast."

This low latency is crucial for many DeFi applications, particularly those involving high-frequency trading or real-time price feeds. The on-demand model also helps to reduce unnecessary network congestion and costs associated with constant price updates.

Trusted Execution Environments (TEEs) in Switchboard

A significant innovation in Switchboard's oracle network is the use of Trusted Execution Environments (TEEs). TEEs provide a secure enclave for processing sensitive data, ensuring that even the machine's owner cannot access the private keys or manipulate the data within the TEE.

Dr. Blox elaborated on the role of TEEs in Switchboard's architecture:

"When an oracle comes up, they are all within the AMD SEV verifiable runtime. And what they do is when they come up, they produce something called a report. And this report has a public key of their signing key that they are guaranteeing or they're basically proving is within this protected container that is running our oracle."

This approach adds an extra layer of security to the oracle network, as it provides cryptographic proof that the data processing occurred within a trusted environment and was not tampered with.

The Guardian Network

Switchboard's architecture includes a network of "guardians" that play a crucial role in verifying the integrity of the oracle network. Dr. Blox explained:

"The guardians are the ones that actually allow them to join the network in the first place. Proving that they are an oracle seems like the guardian role is one that could potentially benefit from some type of like a stake or incentive to, you know, verify these TEEs."

These guardians cross-verify each other and ensure that all oracles in the network are running the correct code within their TEEs. This distributed verification system adds another layer of security and trust to the Switchboard network.

Integration with Jito Restaking Protocol

One of the exciting developments discussed in the podcast is Switchboard's integration with the Jito restaking protocol. This integration allows Switchboard to leverage Jito's infrastructure for staking and delegation, potentially increasing the network's efficiency and security.

Hayden from the Jito Foundation explained:

"We use Switchboard oracles. So like we have this restaking protocol, the restaking protocol, if you're holding Jito SOL, you can take the Jito SOL, restake it into one of the vaults. The vaults are then, you know, you then restake it into one of the vaults."

This integration demonstrates the growing interconnectedness of different protocols within the Solana ecosystem, highlighting the potential for synergies and increased efficiency.

The Economics of Switchboard's Oracle Network

Switchboard employs a unique economic model to incentivize oracle operators and ensure the network's sustainability. Dr. Blox outlined the fee structure:

"We actually have a small charge that it comes with every price update and that varies between 20,000 lamports to 100,000 lamports based off of the network traffic."

In addition to these per-update fees, Switchboard also implements a subsidy model to encourage the onboarding of new oracle operators. This dual approach helps to maintain a healthy and growing network of oracle providers.

Futarchy and the MetaDAO Grant

An interesting aspect of the podcast discussion was the involvement of MetaDAO and their futarchy model in allocating grants for the Jito ecosystem. Colin from MetaDAO explained their approach:

"What we've done here is you have a decision market and you use some threshold. In this case, we use like price between zero and one. And if the threshold is exceeded during a three day trading period, then by the time that's over, the grant, half of the grant gets awarded."

This innovative approach to grant allocation uses prediction markets to gauge the potential value and success of projects within the ecosystem. In the case of Switchboard, a grant of 300,000 JTO tokens was awarded, with half released upfront and the remainder contingent on achieving certain milestones.

Future Developments and Use Cases

Looking to the future, Dr. Blox hinted at the potential for expanding the use of TEEs beyond just oracle services:

"We have the sale SDK and we are going to have basically this whole component where people can talk to our guardians on the main queue. They get their quotes verified, let's say, for their AI agents that they want to bring that on-chain."

This suggests that Switchboard's infrastructure could potentially be used for a wide range of decentralized applications beyond just price feeds, opening up new possibilities for secure, verifiable off-chain computation in the blockchain space.

Challenges and Considerations for TEEs

While the potential of TEEs is significant, the discussion also touched on some of the challenges and considerations surrounding this technology. Colin raised some important questions:

"I have a fundamental disconnect of where these scale out in mass and, you know, like how you verify that the work that was done is actually valid work that's been done. Not that work has been done, but that the system that you built processed the data as it was defined to do and then produced a result that like actually did that."

These concerns highlight the ongoing need for research and development in the field of TEEs and their applications in blockchain technology.

Conclusion

The discussion with Dr. Blox and the team from Switchboard provides valuable insights into the cutting-edge developments in oracle technology within the Solana ecosystem. From customizable data feeds to the use of Trusted Execution Environments, Switchboard is pushing the boundaries of what's possible in decentralized finance.

As the DeFi landscape continues to evolve, the role of reliable, fast, and secure oracle networks will only grow in importance. Switchboard's innovative approach, combined with its integration into the broader Solana ecosystem through partnerships like the one with Jito, positions it as a key player in the future of decentralized finance.

The use of futarchy models for grant allocation, as demonstrated by MetaDAO, also offers an intriguing glimpse into new ways of decision-making and resource allocation within blockchain ecosystems. As these technologies and approaches mature, they have the potential to revolutionize not just finance, but a wide range of industries and applications.

Facts + Figures

• Switchboard has been an oracle on Solana since April 2021
• Switchboard currently secures around $4-5 billion in Total Value Locked (TVL)
• Switchboard is one of the first, if not the first, external Jito NCN to integrate for staking systems
• Switchboard's oracle network achieves average response times of 300-400 milliseconds
• The speed of light around the earth is about 181 milliseconds, highlighting the speed of Switchboard's oracles
• Switchboard's fee structure ranges from 20,000 to 100,000 lamports per price update
• Switchboard currently has about 14-16 oracle operators in its network
• MetaDAO awarded a grant of 300,000 JTO tokens to Switchboard through their futarchy model
• The grant period for Switchboard started on March 13th and has 149 days remaining as of the podcast recording
• The prediction market for Switchboard's success in generating $1 million in value is currently priced at 56 cents
• The total traded volume in the prediction market for Switchboard's grant was around $5,000
• The Switchboard team is working on indexing 6,000 feeds for assets and prices that they believe can be reliably priced

Questions Answered

What is Switchboard?

Switchboard is an oracle network operating on the Solana blockchain since April 2021. It allows users to create customizable data feeds, setting it apart from other oracle protocols that typically provide a fixed set of data feeds. Switchboard secures around $4-5 billion in Total Value Locked (TVL) and plays a crucial role in providing external data to various DeFi applications on Solana.

How does Switchboard's customizable data feed work?

Switchboard's customizable data feeds allow users to tailor their oracle sources according to their specific needs. Users can choose which liquidity sources to include, filter out low-liquidity sources, combine multiple data sources, and even implement safeguards against price divergences. This flexibility enables DeFi platforms to create oracles that match their specific requirements and risk tolerances, ensuring they have the most relevant and reliable data for their applications.

What security measures does Switchboard employ?

Switchboard uses a robust security model that includes on-chain verification of oracle work and timing. When a data feed update is requested, the oracle processes the data, signs it with the latest block hash, and returns a signature containing the hash of the processed data, the workflow hash, and the slot hash. Additionally, Switchboard employs Trusted Execution Environments (TEEs) to ensure that data processing occurs in a secure, tamper-proof environment, adding an extra layer of security to the oracle network.

How does Switchboard integrate with the Jito restaking protocol?

Switchboard integrates with the Jito restaking protocol, allowing users holding Jito SOL to restake it into vaults. This integration enables Switchboard to leverage Jito's infrastructure for staking and delegation, potentially increasing the network's efficiency and security. The integration demonstrates the growing interconnectedness of different protocols within the Solana ecosystem and highlights the potential for synergies between various blockchain projects.

What is the role of Trusted Execution Environments (TEEs) in Switchboard's architecture?

Trusted Execution Environments (TEEs) play a crucial role in Switchboard's architecture by providing a secure enclave for processing sensitive data. When an oracle joins the network, it produces a report within the AMD SEV verifiable runtime, which includes a public key proving that the oracle is running within a protected container. This approach ensures that even the machine's owner cannot access private keys or manipulate data within the TEE, adding an extra layer of security to the oracle network.

How does Switchboard's economic model work?

Switchboard's economic model includes a fee structure and a subsidy program. The fee structure charges between 20,000 to 100,000 lamports per price update, depending on network traffic. Additionally, Switchboard implements a subsidy model to encourage the onboarding of new oracle operators. This dual approach helps maintain a healthy and growing network of oracle providers while ensuring the network's sustainability.

What is the futarchy model used by MetaDAO for grant allocation?

MetaDAO uses a futarchy model for grant allocation, which involves creating a decision market with a price threshold between zero and one. If the threshold is exceeded during a three-day trading period, half of the grant is awarded. The market then becomes a prediction market, evaluating the likelihood of the project achieving its stated goals. This approach uses market mechanisms to gauge the potential value and success of projects within the ecosystem, providing a novel way to allocate resources.

What future developments is Switchboard working on?

Switchboard is working on expanding the use of TEEs beyond oracle services. They are developing an SDK called "sale" that will allow people to create verifiable runtimes for various applications, including AI agents that can be brought on-chain. This suggests that Switchboard's infrastructure could potentially be used for a wide range of decentralized applications beyond just price feeds, opening up new possibilities for secure, verifiable off-chain computation in the blockchain space.