6. Risks and Application Scenarios
Of course, the Sphinx protocol is not perfect, and there are some risks. The main risk lies in the fact that the predicted digital assets are not widely accepted and therefore not sufficiently competitive. This would result in insufficient incentive for validators to participate, and the difficulty of forming accurate and timely prices when there is significant arbitrage space. Response options should focus on enhancing the arbitrage space combined with network advocacy.
Another risk is similar to a 51% attack on a POS network. When a malicious attacker takes control of more than 51% of the SPX in the network and initiates changes to important network parameters potentially leading to destabilization of the oracle network, or mass evacuation of miners. However, the likelihood of this happening is very low. First, SPX is mainly held by large miners in the network, and it is in their interest to maintain the stability of the network. Sphinx is focused on building the long-term value of SPX tokens combined with on-chain governance, which makes miners and coin holders willing to hold SPX for a long time to further strengthen the Sphinx network together.
The Sphinx protocol as a set of direct oracles is more suitable for the price prediction of digital assets because digital assets themselves are the native assets of the blockchain network. The context of its time is that centralized exchanges dominate people's attention, but centralized exchanges are more easily manipulated by human beings. DEXes such as Uniswap are gradually encroaching on CEXes turf. Even in the current situation where the pricing power of some digital assets is still in centralized exchanges, miners will fully consider their risks and can effectively artificially shield unreasonable prices among CEXes. The Sphinx protocol is currently the best choice for blockchain native asset oracles.
Of course, indirect oracles also have their place. They are more suitable for a wide range of off-chain data, such as weather, logistics, equipment operation information, etc. The low risk of attack scenarios means they have a lower cost of implementation.
DeFi is still in the early stages of development, and the risk of the project is difficult to quantify and not calculable. To achieve the pricing of assets is to determine the optimal price calculation problem, this problem is not a P calculation that can be solved. The Sphinx Protocol uses on-chain game theory to get infinitely close to this price. The formation of a price chain through the Sphinx protocol can quantitatively assess the risk taken by the oracles from the asset scale chain, thus promoting the evolution of DeFi distributed finance to CoFi computable finance.