The Origin and Evolution of Switchboard

Switchboard, an oracle network that has been live since 2021, was born out of a vision to revolutionize the way decentralized finance (DeFi) operates. Chris Hermida, one of the co-founders, shared the genesis of the project, rooted in his experience working at Circle's trading desk. The original concept behind Switchboard was to build something in the derivatives space, focusing on the long tail of emerging Layer 1 (L1) and Layer 2 (L2) blockchain solutions.

Hermida explained, "The original vision of Switchboard was actually to try to build something in that space really focused on the long tail. And the idea was up and coming L1s and even to next in L2s would enable low TXVs, which would make new derivative markets profitable or at least to make sense to spin up, otherwise wouldn't on say ETH is L1."

This vision required an oracle solution that could swiftly and efficiently support a wide range of price feeds and data, particularly for more esoteric or exotic assets. The goal was to make it as simple and easy as possible to bring this long-tail data on-chain in a fast, cheap, and reliable manner.

The Evolution of Switchboard

Mitch Gildenberg, CTO of Switchboard, provided insights into how the protocol has evolved since its inception. He highlighted three distinct versions of Switchboard, each addressing different aspects of the oracle problem:

1. V1 (April 2021): Focused on providing an adaptive oracle offering for Solana's early days, allowing quick spin-up of markets from scratch.

2. V2: Introduced permissionless functionality, allowing users to create their own feeds and offering a no-code UI for choosing data sources.

3. V3: Incorporates an Oracle incentive system and a layer of hardware-attested security, along with scheduling and free-form code execution capabilities.

Gildenberg emphasized the progression towards a more permissionless platform: "That's really where V2 came in, with allowing people to create their own feeds, offering a no-code UI for people to choose their data sources, and really give that whole permissionless data aspect to Switchboard."

Solving Crypto's Oracle Problem

The core function of an oracle service is to bring off-chain data on-chain and into the blockchain world. Switchboard addresses this challenge through three primary data models:

1. Oracle Push Model: The most common model where oracles push data on-chain when it meets certain variance thresholds.

2. Callback Model: Protocols can request new price updates for specific feeds, which are then delivered on-chain by the Oracle network.

3. Pull Model: Users can request prices from an Oracle Layer 1 or Oracle network when needed, bringing the data on-chain themselves.

Each model has its advantages and trade-offs, catering to different use cases and requirements. The push model, while widely used, doesn't guarantee 100% freshness of data. The callback and pull models offer more control over when data is updated, potentially reducing gap risk in trading scenarios.

Trusted Execution Environments (TEEs) and Switchboard V3

A significant innovation in Switchboard's V3 is the incorporation of Trusted Execution Environments (TEEs). TEEs provide a secure enclave where code can be executed with a high degree of confidence that it hasn't been tampered with.

Gildenberg explained the importance of TEEs: "So really what TEEs are are a special type of hardware where when you load a program onto a certain chip, you can actually verify that is this program running in any output from this program is from, let's say, an Oracle from an Oracle that's actually registered on chain."

This technology allows Switchboard to offer a higher level of security and transparency. Users can verify that the code producing Oracle outputs is exactly what they expect it to be, adding an additional layer of trust to the Oracle network.

The Mango Exploit and Lessons Learned

The discussion touched upon the Mango protocol exploit in 2022, which highlighted some of the challenges faced by Oracle networks. Chris Hermida provided insights into what happened and the lessons learned from this incident.

The Mango attack was essentially a price manipulation attack on the MNGO token. The attacker manipulated the underlying price on multiple sources over time, artificially increasing the price of MNGO. This manipulated price was then used to exploit the settlement system of the Mango protocol.

Hermida emphasized that this wasn't strictly an Oracle attack but rather a price manipulation flowing through the Oracle: "These types of attacks, we wouldn't necessarily call them Oracle attacks per se. We'd call them price manipulation flowing through the Oracle."

This incident underscored the importance of robust risk management systems and the need for protocols to carefully consider how they use Oracle data, especially for low-liquidity assets.

Liquid Staking Tokens and Fair Value

The conversation shifted to the challenges of pricing liquid staking tokens (LSTs) as collateral in lending markets. This topic came up in the context of a recent debate between Marinade and Solend on how to price Solana LSTs.

Hermida highlighted the complexity of determining fair value versus market value for LSTs: "There is a fair value formula that you can come to for LSTs using, say, something like Santa, or using, you know, some other sort of on-chain indicator of saying, if we redeem this LST, write the second for the underlying amount of soul, right, what would this be worth right here?"

However, he also pointed out that no matter how good the fair value calculation is, it can't entirely eliminate gap risk or smart contract risk. The discussion emphasized the need for lending protocols to consider multiple factors when valuing LSTs as collateral, including potential vulnerabilities and critical attacks.

Switchboard Functions and Code Execution

One of the most exciting features of Switchboard V3 is the ability to execute custom code off-chain and bring the results on-chain. This functionality, known as Switchboard Functions, opens up a wide range of possibilities for developers and protocols.

Mitch Gildenberg explained how Functions work: "So you can think of it like this. So in our V2, we deal with purely quantitative data and verify that quantitative data. And functions, how it works is that we use TEEs to verify an Oracle's execution of essentially a whole process to create a full transaction."

This feature allows users to create custom data feeds, perform complex calculations off-chain, and bring the results on-chain in a verifiable manner. It's particularly useful for scenarios that require more than simple price data, such as aggregating information from multiple sources or performing complex computations.

Oracle Randomness and Its Importance

The podcast delved into the challenge of creating true randomness on-chain and why it's crucial for certain applications. Mitch Gildenberg explained the difficulty in proving that randomness is truly unbiased and unpredictable.

Switchboard addresses this challenge using TEEs: "With Switchboard randomness, we actually source it from inside of our enclave and we can produce that whole quote system that we showed that we actually have signed all of this randomness with a key that we've definitely made inside an enclave."

This approach provides a high degree of confidence in the randomness generated, which is essential for applications like gaming, lottery systems, and certain DeFi protocols that require unpredictable inputs.

The Switchboard Oracle Network

The Switchboard Oracle network consists of approximately 20 nodes, with plans for expansion. The team is making a push for a new onboarding model called "Switchboard on demand," which aims to make the service more accessible and web2-like in its user experience.

Chris Hermida invited interested parties to join their node partner program: "The node partner program is open to folks. So, you know, if you're interested to reach out to us on Discord or via email, and we'll get you in that beta program."

Decentralization and Economic Incentives

The podcast touched on the importance of decentralization in Oracle networks and how Switchboard approaches this challenge. While complete decentralization is difficult due to the reliance on some centralized web2 services for data, Switchboard aims to ensure redundancy and multiple independent sources.

Hermida explained their approach: "What we try to do and really ultimately, honestly, everyone tries to do is ensure that there's enough multiple redundant sources for whatever that might be, whether it's nodes, whether it's data providers, you can insert sort of your choice there so that if there is an issue with one in particular, it doesn't affect the whole network."

Regarding economic incentives, Switchboard uses a combination of economic security and trusted enclaves to ensure data integrity. The team emphasizes the importance of considering the specific context and value at risk for each feed when designing security measures.

The Future of Oracles and On-Chain Data

Looking towards the future, the Switchboard team sees tremendous growth potential in the Oracle market and on-chain activity in general. Chris Hermida expressed optimism about the future: "Our thesis and when we started was that, you know, the future of everything is going to be on chain. You're going to see more and more commerce happening on chain in some way, shape, or form, you know, exponentially growing over the next 10, 20 years."

The team believes that as more assets and activities move on-chain, the demand for reliable and customizable data feeds will grow exponentially. They see potential not just in traditional finance and DeFi, but also in gaming, real-world asset tokenization, and entirely new use cases that haven't been imagined yet.

Switchboard's Unique Value Proposition

When asked about Switchboard's key differentiators, the team emphasized their focus on helping new and upcoming projects quickly bring innovative products to market. Hermida stated, "When you think of things like that, it's really saying, wow, we just ship this brand new feature or this brand new market that was uniquely possible with Switchboard."

Their mission is to make it as easy as possible for developers and projects to bring customizable data on-chain, enabling the next generation of DeFi products, real-world asset integrations, and innovative use cases in areas like GameFi.

The Oracle Market and Switchboard's Position

While Switchboard currently secures over $800 million across 12 protocols, representing about 1.5% of the total value secured by Oracles, the team takes a collaborative rather than competitive view of the market. They believe the entire Oracle market has the potential to grow 100x from its current size.

Hermida emphasized this positive-sum perspective: "We're not thinking necessarily competitive, focused, we're thinking, okay, how can we help power these new use cases that we think are going to help 100x the size of this market and bring the next generation of people on chain?"

Cross-Chain Compatibility and Future Integrations

Switchboard's multi-chain support is a key feature of the protocol. While it has found significant traction on Solana, securing over $800 million across 12 protocols, it also supports EVM chains like Ethereum and many of its L2s. The team is actively working on integrations for newer chains like Sway, Aptos, and even upcoming projects like Monad.

This cross-chain compatibility positions Switchboard to play a crucial role in the increasingly interconnected blockchain ecosystem. As new chains and L2 solutions emerge, Switchboard's ability to provide reliable Oracle services across multiple networks could be a significant advantage.

The Importance of Customizable Data Feeds

One of Switchboard's core strengths is its emphasis on customizable data feeds. This feature allows protocols and developers to create exactly the type of Oracle they need, rather than being limited to pre-defined options.

Gildenberg highlighted this flexibility: "If you want to make a whole job schema that's identical to somebody else's BTC USD feed, then that's going to be a single data feed. If you want to add one more source, then the hash is going to be different."

This level of customization is particularly valuable for projects working with niche assets or requiring complex data aggregation. It enables innovation by allowing developers to bring any type of data on-chain in a secure and verifiable manner.

Addressing the Challenges of Real-World Asset (RWA) Integration

The conversation touched on the potential for bringing real-world assets (RWA) on-chain and the role Oracles play in this process. While regulatory challenges currently limit some aspects of RWA tokenization, the team sees significant potential in this area.

Hermida drew a comparison to traditional finance: "If you think about getting a hard money loan, say against a piece of property versus borrowing against, say, your Bitcoin or ETH or Solana, it is far more easier to go borrow on, say, you know, Solend or Mango against, you know, your crypto there, than it is to go try to get a hard money loan and borrow against physical real estate."

As the regulatory landscape evolves, Switchboard's flexible Oracle solution could play a crucial role in bringing reliable real-world data on-chain, facilitating the integration of traditional assets into the blockchain ecosystem.

The Role of Oracles in DeFi Security

The podcast highlighted the critical role that Oracles play in DeFi security, particularly in the context of lending markets and liquidations. The Mango exploit served as a case study for the importance of robust Oracle systems and the need for protocols to implement additional safeguards.

Hermida emphasized the need for a holistic approach to security: "These are decisions that ultimately every protocol needs to evaluate in their own context and in their own risk sort of analysis of how they want to handle these sorts of both adverse risks, but also the trade-offs between UX and safety."

This perspective underscores the need for close collaboration between Oracle providers like Switchboard and the protocols that rely on their data. It also highlights the importance of educating DeFi users about the risks and trade-offs involved in different Oracle implementations.

Innovations in Oracle Technology

Throughout the discussion, it became clear that Switchboard is at the forefront of innovation in Oracle technology. The use of Trusted Execution Environments (TEEs) for both data verification and randomness generation represents a significant advancement in the field.

Gildenberg explained the unique advantages of their approach: "We can use an enclave secret, which is an embedded hardware secret that we know has not been revealed deterministically by, you know, the fellowship manufacturer that those secrets are secured by these TEEs."

These technological innovations not only enhance security but also open up new possibilities for Oracle use cases. The ability to execute custom code in a secure enclave and bring the results on-chain in a verifiable manner could enable entirely new categories of blockchain applications.

The Future of Blockchain Commerce and Oracle Demand

The Switchboard team expressed a bullish outlook on the future of blockchain-based commerce and the resulting demand for Oracle services. They anticipate exponential growth in on-chain activity over the next 10-20 years, driving increased need for reliable off-chain data.

Hermida painted a picture of this future: "You're going to see more and more commerce happening on chain in some way, shape, or form, you know, exponentially growing over the next 10, 20 years."

This vision suggests that Oracle networks like Switchboard will play an increasingly crucial role in the blockchain ecosystem, serving as the bridge between off-chain data and on-chain applications across a wide range of industries and use cases.

Switchboard's Approach to Market Growth

Rather than focusing on competing for market share within the existing Oracle landscape, Switchboard aims to grow the overall market for Oracle services. This approach involves identifying and enabling new use cases that can drive adoption of blockchain technology.

Hermida articulated this strategy: "What we care about is more getting some percentage and growing with that pie than necessarily trying to engage in zero sum games that, you know, ultimately are less helpful than trying to grow together."

This collaborative mindset could be beneficial for the entire blockchain ecosystem, fostering innovation and expanding the range of applications that can be built on blockchain technology.

The Importance of User Experience in Oracle Services

Throughout the discussion, the Switchboard team emphasized the importance of user experience in Oracle services. Their "Switchboard on demand" initiative aims to make Oracle services more accessible and user-friendly, potentially lowering the barrier to entry for new projects looking to integrate Oracle data.

Gildenberg described this approach: "We are making a very large push for the Switchboard on demand onboarding model now, where it actually ends up looking like a web2 service for you, where you are hosting this REST API for users to go call, that you can get signatures from your Oracle, and then you can submit responses on chain."

This focus on user experience could be a key differentiator for Switchboard as the Oracle market becomes increasingly competitive and as more developers seek to integrate off-chain data into their blockchain applications.

Balancing Security and Efficiency in Oracle Design

The podcast highlighted the ongoing challenge of balancing security with efficiency and cost-effectiveness in Oracle design. While maximum security might require extensive decentralization and redundancy, this can lead to increased costs and reduced performance.

Switchboard's approach involves using a combination of economic incentives, trusted hardware, and customizable feed configurations to achieve an optimal balance for each use case. This flexible approach allows protocols to tailor their Oracle implementation to their specific needs and risk tolerance.

The Role of Community in Oracle Development

The Switchboard team emphasized the importance of community involvement in the development and operation of their Oracle network. By opening up their node partner program and encouraging permissionless feed creation, they're fostering a collaborative ecosystem around their technology.

This community-driven approach could be crucial for the long-term success and resilience of the Oracle network. It allows for rapid innovation, diverse use cases, and a more robust and decentralized system overall.

Conclusion: Switchboard's Vision for the Future of Oracles

As the podcast concluded, it became clear that Switchboard is not just building an Oracle network, but actively shaping the future of how off-chain data interacts with blockchain technology. Their innovations in areas like trusted execution environments, customizable data feeds, and cross-chain compatibility position them as a key player in the evolving blockchain landscape.

The team's vision extends beyond simply providing price feeds for DeFi applications. They see Oracles as a crucial component of a future where a wide range of real-world activities and assets are represented on-chain. By focusing on flexibility, security, and user experience, Switchboard is working to enable the next generation of blockchain applications across DeFi, gaming, real-world asset tokenization, and beyond.

As the blockchain ecosystem continues to grow and evolve, Oracle networks like Switchboard will play an increasingly vital role in bridging the gap between off-chain data and on-chain applications. Their success in this mission could be a key factor in driving widespread adoption of blockchain technology across various industries and use cases.

Facts + Figures

• Switchboard has been live since 2021 and is currently on version 3 (V3) of their protocol.
• Switchboard currently secures over $800 million across 12 protocols, primarily on Solana.
• The Switchboard Oracle network consists of approximately 20 nodes.
• Switchboard supports multiple blockchain networks, including Solana, Ethereum, and various Layer 2 solutions.
• The total value secured by Oracle networks is estimated to be around $50 billion, with Switchboard representing about 1.5% of this market.
• Chainlink, the largest Oracle network, secures about 53% of the total value in the Oracle market.
• Switchboard's V3 incorporates Trusted Execution Environments (TEEs) for enhanced security and verifiability.
• The Mango protocol exploit in 2022 involved price manipulation of the MNGO token, highlighting challenges in Oracle data usage.
• Switchboard offers three main data models: Oracle Push, Callback, and Pull.
• Switchboard Functions allow for custom code execution off-chain with on-chain verification.
• The team anticipates the Oracle market to potentially grow 100x from its current size.
• Switchboard is actively working on integrations for newer blockchain networks like Sway, Aptos, and Monad.
• The protocol allows for permissionless creation of customized data feeds.
• Switchboard uses a combination of economic incentives and hardware security (TEEs) to ensure data integrity.
• The team envisions exponential growth in on-chain commerce over the next 10-20 years.

Questions Answered

What is Switchboard?

Switchboard is an Oracle network that brings off-chain data onto various blockchain networks, including Solana, Ethereum, and others. It provides customizable data feeds and secure code execution capabilities, allowing developers to access a wide range of off-chain information for their on-chain applications. Switchboard has been live since 2021 and is currently on its third version (V3), which incorporates advanced features like Trusted Execution Environments for enhanced security and verifiability.

How does Switchboard solve the Oracle problem in crypto?

Switchboard addresses the Oracle problem through a multi-faceted approach. It offers three main data models: Oracle Push, Callback, and Pull, allowing protocols to choose the most suitable method for their needs. Additionally, Switchboard uses Trusted Execution Environments (TEEs) to ensure the integrity and security of data and code execution. The protocol also emphasizes customizability, allowing users to create permissionless data feeds tailored to their specific requirements. This flexibility, combined with robust security measures, helps mitigate many of the challenges associated with bringing off-chain data on-chain.

What are Trusted Execution Environments (TEEs) and how do they enhance Oracle security?

Trusted Execution Environments (TEEs) are special hardware components that allow code to be executed in a secure, isolated environment. In the context of Switchboard, TEEs enhance Oracle security by providing a verifiable way to ensure that the code producing Oracle outputs hasn't been tampered with. When a program is loaded into a TEE, it creates a unique measurement that is included in every signature of outputs produced by the Oracle. This allows users to verify that any data or computation result coming from the Oracle was indeed produced by the expected code running in a secure environment, significantly increasing the trustworthiness of the Oracle's outputs.

How does Switchboard handle randomness generation?

Switchboard addresses the challenge of generating true randomness on-chain through its use of Trusted Execution Environments (TEEs). The randomness is sourced from within the secure enclave of the TEE, which can produce a verifiable quote showing that the randomness was generated using a key created inside the enclave. This approach provides a high degree of confidence in the unpredictability and unbiasedness of the generated random numbers. Switchboard also offers a commit-reveal scheme for scenarios requiring multi-party trust, allowing users to submit a seed to the enclave for randomness generation, ensuring that neither the enclave nor the user could have known the output beforehand.

What lessons were learned from the Mango protocol exploit?

The Mango protocol exploit in 2022 highlighted several important lessons for the Oracle industry. Primarily, it demonstrated that price manipulation attacks can occur even when Oracles are functioning correctly if the underlying price sources can be manipulated. This incident emphasized the need for protocols to implement robust risk management systems, particularly when dealing with low-liquidity assets. It also underscored the importance of considering multiple factors when using Oracle data, such as implementing time-weighted average prices (TWAPs) or other smoothing mechanisms to mitigate the impact of short-term price manipulation. The exploit serves as a reminder that Oracle security is a shared responsibility between the Oracle provider and the protocols using the data.

How does Switchboard approach the challenge of pricing liquid staking tokens (LSTs)?

Switchboard recognizes the complexity of pricing liquid staking tokens (LSTs) as collateral in lending markets. The protocol allows for the implementation of fair value formulas that take into account the redeemable value of the LST in terms of the underlying asset. However, Switchboard also emphasizes the importance of considering factors beyond just the current market price, such as potential smart contract risks and gap risks. The team suggests that protocols using LSTs as collateral should carefully evaluate their specific context and risk tolerance, potentially implementing additional safeguards or using time-weighted average prices to smooth out short-term fluctuations.

What are Switchboard Functions and how do they work?

Switchboard Functions are a feature that allows users to execute custom code off-chain and bring the results on-chain in a verifiable manner. This is achieved through the use of Trusted Execution Environments (TEEs). Users can create a script or job schema defining the computation they want to perform. The Switchboard Oracle network then executes this code within a secure TEE, producing a verifiable output that can be brought on-chain. This feature enables complex computations and data aggregation that would be impractical or too expensive to perform directly on-chain, while still maintaining a high level of security and verifiability.

How does Switchboard ensure decentralization in its Oracle network?

Switchboard approaches decentralization through several mechanisms. The network currently consists of approximately 20 nodes operated by independent partners. The protocol allows for permissionless creation of data feeds, enabling a diverse range of data sources and aggregation methods. Switchboard also emphasizes the importance of having multiple redundant sources for data and node operation to prevent single points of failure. While acknowledging that complete decentralization is challenging due to reliance on some centralized web2 services for data, Switchboard aims to minimize trust requirements through its use of Trusted Execution Environments and verifiable computations.

What is Switchboard's vision for the future of Oracle services and blockchain commerce?

Switchboard envisions a future where blockchain-based commerce grows exponentially over the next 10-20 years, driving increased demand for reliable off-chain data on-chain. The team believes that Oracle services will play a crucial role in enabling this growth by providing the necessary bridge between real-world data and blockchain applications. Switchboard aims to support this future by offering flexible, secure, and customizable Oracle solutions that can adapt to a wide range of use cases, from traditional finance and DeFi to gaming, real-world asset tokenization, and entirely new applications that haven't yet been conceived. The team focuses on growing the overall market for Oracle services rather than competing for market share within the existing landscape.

How does Switchboard differentiate itself from other Oracle providers?

Switchboard differentiates itself through several key features and approaches. Firstly, its use of Trusted Execution Environments (TEEs) provides a unique level of security and verifiability for data and computations. The protocol's emphasis on customizability allows users to create permissionless data feeds tailored to their specific needs. Switchboard also focuses on user experience, aiming to make Oracle services more accessible through initiatives like "Switchboard on demand." Additionally, the team takes a collaborative approach to market growth, focusing on enabling new use cases rather than competing directly with other Oracle providers. Switchboard's multi-chain support and ongoing integrations with newer blockchain networks also position it to serve a diverse range of projects across the blockchain ecosystem.