Understand Flux in Five Minutes: Aiming at the NEAR Public Chain, Becoming an Essential Core Component of DeFi

Written by: A Poplar Tree

As a bridge connecting the business needs of DeFi protocols with critical data, oracles are often called upon as key network resources during the development of the DeFi ecosystem, playing an essential role as the core of "infrastructure."

Including recent market volatility moments like the "5.19 crash," the high-frequency operational demands of on-chain DeFi protocols and users cannot do without the critical support of oracles that "do not drop the chain." Otherwise, it could lead to a repeat of the liquidation disaster of MarkDao during "3.12," resulting in irreversible severe consequences.

1. What is Flux Protocol?

Launched in August 2020, Flux Protocol is the first DeFi protocol and decentralized application built and launched on the NEAR protocol. It is currently dedicated to creating oracle services for high-value protocols and data on NEAR, further driving the development of DeFi applications in the NEAR ecosystem, ultimately becoming the core infrastructure of NEAR's DeFi ecosystem.

As a scalable decentralized oracle protocol, Flux can provide various on-chain data (such as assets, commodities, events, etc.) for market trading related to any digital asset or event.

Thanks to the scalability, availability, and innovative design driven by NEAR's random beacon, users on Flux can access various on-chain data at extremely low costs, such as creating and participating in prediction market trades with transaction fees below $0.01.

According to official plans, Flux oracle will also implement cross-chain layouts in the future to provide oracle support services for L1 and L2 protocols with extensive use cases.

2. The "Security Layer" Design of Economic Incentive Games

The "bZx flash loan attack" incident in February 2020 is a typical example that not only opened the Pandora's box of "flash loan attacks" but also thoroughly exposed the risks of traditional oracle price feeds: "attackers" manipulated the prices of WBTC/ETH on Kyber and Uniswap, perfectly exploiting the vulnerability of bZx's simple reliance on Uniswap's price oracle, selling wBTC at a price three times higher than the normal value.

In response, Flux oracle introduced an innovative "security layer" mechanism that can provide widely verified data for various high-value DeFi protocols—mainly combining high throughput with economic guarantees. The optimized Flux oracle can support API, random, and price feed data, ensuring safety through economic guarantees, thus addressing the quality issues of price feed data.

In the mechanism design, data requests sent over the network are verified and resolved by validators, who must place collateral in the network's local assets. The economic guarantee mechanism protects the network's security, making it difficult for malicious actors to compromise data requests.

Moreover, the economic guarantee mechanism is based on a fluctuating data request fee model—the incentives obtained are proportional to the Total Value Secured (TVS) in the protocol. This model dynamically adjusts the amount of data request fees received by validators based on the increase or decrease of the Total Value Secured (TVS), ensuring that validators accurately provide oracle data. This significantly suppresses malicious actors, as the incentives will decrease when the Total Value Secured (TVS) in the protocol declines.

To prevent extreme situations from rendering the economic incentive game ineffective, users can customize the time span for each data request to challenge the oracle's results. Validators automatically monitor all data requests, and if they detect incorrect data responses provided by users, they will make a judgment on the response and stake collateral on what they believe to be the correct result.

At the same time, Flux combines a novel liquidity supply model, employing automated market making (AMM) for price discovery and creating an open and efficient order book, allowing Flux's oracle design to achieve final resolution times as short as 30 minutes, faster than any existing fully decentralized oracle.

This allows Flux oracles to obtain organic data while quickly confirming event outcomes, thus providing an additional "security layer" for existing oracle solutions.

3. "Oracle Aggregator"

In addition, Flux oracles can leverage existing oracles and price feeds (Chainlink, Band, Uniswap), so the aggregation of data includes major references both on-chain and off-chain, fully covering various markets.

This multi-layer data aggregation mechanism maximally ensures the reliability and tamper-resistance of the data, avoiding vulnerabilities from single-node data as seen in the "bZx flash loan attack," providing developers with secure, customized price feed guarantees.

4. Team and Investment Situation

According to official information, the core founders of Flux Protocol, Peter Mitchell and Jasper De Gooijer, are "veterans of the crypto world" who participated in DeFi construction as early as 2017. Jasper previously served as a scalability researcher funded by the Ethereum Foundation in WEB3, while Peter founded a project similar to "Pea Pod" in the crypto world http://EveryDapp.com and later focused on the development of Plasma at the Ethereum Foundation.

Other team members also have rich backgrounds in native crypto, including experience in developing and maintaining DeFi projects (such as Rutile, bZx, etc.), and some members have backgrounds in traditional internet giants like Oracle and Google. Overall, the team's professionalism is quite high.

On May 21, Flux recently completed a $10.3 million seed round financing led by Distributed Global, with participation from Coinbase Ventures, CoinFund, Uncorrelated Ventures, Figment Capital, IOSG Ventures, and others. Flux CEO Peter Mitchell stated that the funds will be used to promote DeFi development on NEAR, becoming an oracle with high-value protocols and data, and will be used to expand the team and attract talent.

According to the official website, investors also include top investors such as a16z, Pantera Capital, and Coinbase Ventures. Additionally, Flux received a portion of a strategic donation from Figment's newly established $16 million fund, aimed at ensuring that Flux oracles will be available for validation nodes on NEAR Protocol and other L1 protocols and Ethereum scaling solutions. Figment will also provide a seamless validation experience for the Flux community.

5. Thoughts on the Flux Ecosystem

From an architectural perspective, Flux Protocol benefits from the underlying characteristics of NEAR, achieving design advantages specifically for high scalability and high elasticity. In this regard, it indeed has the confidence to compete with leading oracles on Ethereum.

Moreover, the difference of Flux Protocol lies in its ability to handle, settle, and finalize real-world data for public markets, as well as its applicability to other protocols, aggregating data to meet diverse customization needs:

The prediction market platform Pulse, as the first DeFi product based on Flux Protocol, is a classic example. Since its launch, its data has been on the rise, currently outperforming leading competitors Augur and Gnosis on Ethereum in terms of user numbers and transaction volumes by dozens of times. According to DappRadar data, it has already become one of the top ten market applications by user volume.

Like Pulse, developers can utilize Flux's corresponding open-source tools to build markets from scratch or integrate them into existing financial products, significantly reducing the cost and time of merging blockchain technologies while meeting customized data needs.

As of June 8, the SDK download count for Flux Protocol has exceeded 10,500, and there are already more than ten projects built on Flux Protocol, indicating that the protocol ecosystem built around Flux has successfully taken its first step.

If we make a simple analogy, oracle projects like ChainLink and Band are indispensable for almost all DeFi protocols, but they are more like browser plugins—essential but only called upon when needed.

In contrast, Flux Protocol is like a killer application akin to WeChat Pay—thanks to its customizable integration advantages, it can serve as a key component deeply embedded in various DeFi protocols, even occupying a core position, gradually forming an ecosystem centered around itself. The challenge is immense, but it is quite courageous.