Introduction of How Paul Protocol Works and Different Roles in Its Ecosystem
Today we’ll talk about how Paul Protocol works to keep its oracle system running stably and securely, as well as those key roles taking apart in this enormous ecosystem.
Here we start from a diagram which generally depicts the system structure and working mechanism of Paul Protocol.
The entire journey is usually kicked started by Quoters. Quoters provide the initial price data through the process called quoting mining. They submit their quoting forms that indicate the trading pair, exchange rate (price) and the asset scale they pledged. and then receive Paul Token as reward. If a quoting form successfully becomes a block price, the mining procedures will be officially triggered. Certain amount of Paul Token will be rewarded to quoters according to the pledged asset scale of their quoting form. These are the major incentives to a quoter that joins the Paul Protocol.
On the other hand, before a quotation of a quoter is promoted to be a valid quote, there will be a validation period. This is when Validators start getting involved. They supervise the work of quoters and evaluate the effectiveness of their quotes. If the gap is big, Validators can grab this arbitrage chance to earn their profit. Only when a quote survives throughout a validation period, it means that there is no enough arbitrage space between this price and the fair price of the market. Therefore, we can conclude that this quote is indefinitely closed to the actual current price. Through the involvement of validators, it allows market itself evaluate the quote accuracy, which is the best solution in an on-chain delayed situation.
If there are no new valid quotes generated for three successive validation periods, then the protocol will judge that the price validation mechanism already cannot respond accurately to the market change and the Mechanism B will be triggered automatically by our Sword Man. An effective deal quote will be calculated according to the deal quote in the previous time period and its effectiveness will be assessed by the method of hypothesis testing, which is powered by our comprehensive statistical algorithm.
Therefore, the prices of Paul Oracle are determined by two mechanisms collectively: Valid Quote and Effective Deal Quote. The double-mechanism design can effectively ensure the timeliness and usability of Paul-Price all day long.
Quoter, Validator and Sword Man join force to work as the data providers of the Paul Oracle system, delivering high-quality quotes to the DeFi market. Quoters provide the initial price data through quoting mining; Validators are responsible for validate the effectiveness of the quotes provided by quoters; while under extreme situations, Sword Men provide elastic data for the stable running of Paul Oracle. As a return, they all can earn their incentives for their specific contributions.
With all the efforts made by above, it makes Paul Protocol a real double-mechanism risk resistant oracle that has superior performance and timeliness over its competitors.
OK, well done. Next time I’ll bring you good news. Please stay safe and be happy all the time. See you guys soon :)