What is Blockchain Oracle?
Before the existence of Blockchain oracles, blockchain network could not send or receive data from the real world because of the technologies incompatibility. The blockchain network could not communicate with web APIs and hardware. Then Blockchain oracles were invented which chanced the course of the blockchain future. Oracles (blockchain oracles) are simply intermediaries which provide smart contracts of blockchain networks with information outside the network. It acts by querying, verifying and authenticating data which are located off the blockchain network and afterward relay it to blockchain network that requires such data.
Blockchain Oracle don't compulsorily work by relaying data to blockchain network only. They can be inbound or outbound. Inbound meaning they get data from external sources to smart contracts while outbound sends data from smart contracts of a blockchain network the external world such as in the case of a smart lock.
Different blockchain oracles exist which include but not limited to ChainLink, Bandprotocol and WinkLink. All these traditional blockchain oracles act as third -party oracles intermediaries between already existing APIs and the smart contracts of blockchain networks. In this post, I'd introduce us to API3 which is a first-party oracle.
NB: In this post, I'd refer to already existing traditional blockchain oracles such as chainLink as third-party oracles, traditional oracles and middlemen.
1- History and Description. Does it have any token or cryptocurrency associated? Explain.
There exist an increasing need for decentralized applications (DApps) to communicate with traditional web APIs in order to provide efficient services to users. Third-party blockchain oracles have not been able to adequately solve the Web API connectivity problem, majorly due to their over -generalized and misguided approach. The method employed by traditional Oracle is to provide Decentralized interoperability solutions which do not reveal their data sources. This is where API3 comes to the rescue.
What is API3? (History and Description)
API3 is a Blockchain Oracle Co-Founded by Heikki Vänttinen and Burak Beligiray in 2020 as an alternative to traditional blockchain oracles.
The aim of API3 is to create decentralized APIs (dAPIs) which are natives to blockchains, thereby eliminating the presence of middlemen (third-party intermediaries) and ultimately providing a more secure and cost-effective solution to the Web API connectivity problem. In a traditional blockchain Oracle, middle men are employed because of lack of better alternatives, however, these middlemen are centralized and less cost-efficient.
The legal name of the company is The API3 Foundation Company Limited with its headquarters in Grand Cayman, Midland, Cayman Islands. The company has raised a total funding of $3 million. The first fund raising was in November 18, 2019 from a pre-seed round while their latest fund raising was in November 12, 2020 from a Seed round with 10 investors.
API3 has a total of 13 investors which include Emurgo, CoinFUnd, Sosv, Pantera, dlab, Placeholder, DigitalCurrency Group, Accomplice, Hashed, Rarestone, SOlidity, Block0 and Equilibrium. With an initial 3 investors from the pre-seed round in 2019 an an additional 10 investors in 2020. The project seem to be promising.
The official website of API3 is api3.org. It has a monthly visit of 30,648 with most of its traffic from the United States and United Kingdom.
API3 has patnered with OpenBank Project, Fantom, Glitch, Kleros, AllianceBlock, Matic, Streamr, Curvegrid, ChainAPI, BlockGroup, Omen, Bird.Money, Harmony, TomoChain, Woo, Plasm, Pocket, Royale, Conflux, OptionRoom, Enterprise Ethereum ALliance, MobiFi, Curve Labs, Bridge, Dafi and Knit Finance
Does API3 have any Token or Cryptocurrency associated?
Yes! API3 has a native token which goes by its name API3 which went live at the start of December. It is an ERC-20 token and is ranked #407 on coinmarketcap. As at the time of writing this post, the worth of API3 token is $5.51 with a 24 hour circulating volume of $17,455,813 and a market cap of $76,356,326 (which is a 5.9% 24 hour decrease). API3 has a maximum supply of 100,000,000 tokens. API3 is listed on different top exchanges which include OKEx, Huobi Global, Hotcoin Global, Gate.io, and ZT.
There are several primary use of the API3 token. One of the most fundamental is for the governance within the decentralized autonomous organization (DAO) of API3, this ensures that stakers, API providers and dAPPs have their own say in the development and security of the network. Stakers stake the coins and receive rewards, and are also granted the ability to vote.
API3 has raised a lot of funding since its inception. It raised a sum of $3 million in November 2020, a private funding round. After this round was a public sale in December 2020 which raised $23 million. The starting curve was at $0.3 per token, rising up to $2.00 at the end of the public sale.
2- Functionalities and real-life applications.
Decentralized APIs unlike traditional web APIs are native to smart contracts. This solves the overgeneralization problem associated with traditional third party Oracles which act as middlemen by interoperating with arbitrary systems through technical interfaces in general sense. There is no need for a third-party to act as a layer between API (which originally were created to solve data and functionality sharing problems) and blockchain network: Instead, why not creates APIs (dAPIs) which are compatible with the blockchain network and have data providers to become their own blockchain oracles. This reduces the vulnerability data is exposed to as a result of multiple channels the data has to pass through to get to its final destination.
In the API3 model, API owners operate API3 that serves to connect their already existing API to blockchain network (This is referred to as First-party oracles). This way, blockchain networks are sure of the source of their data rather than having a traditional third-party network retrieve and aggregate data from different unknown source.
API3 is able to achieve all these with a cloud service infrastructure called Airnode. Airnode is an off-chain system oracle node that is fully operated by API providers. It acts as a gateway which takes data from already existing API and transfers it to smart contracts.
Many platform requiring reliable source for real-life data can employ the use of API3 as they are certain about the source of their data. Getting data directly from the real data providers while eliminating the third-party oracle is a much better improvement when compared to traditionally existing oracles. There is minimal risk of data manipulation and the cost of operation lost to the middle men is eliminated. Hence election sites can now directly send results to betting sites. Weather forecasting organizations can also have their APIs send data directly to smart contracts.
3- Pros and Cons.
There are benefits/merits / pros associated with first-part oracles (API3) and as well some demerits/cons, why it is not easily convenient for API providers to operate their own first-party oracles.
Benefits/PROS of API3
- Data Security: This benefit of API3 can not be over emphasized. First-party oracles transfer data through the platform protocol-level directly from their APIs to smart contracts using their private keys(Third-parties can not observe or manipulate raw data from first-oracle because they are private by default.). API3 enables the elimination of middlemen and data security is assured. API3 is the most logical technology to be adopted b blockchain network because first-party oracles can be used natively with full assurance of data purity.
- Data Transparency and Decentralization: Unlike third-party oracles whose operations are not transparent enough, in API3, the number of oracles providing data is visible and accurately represented as first-party oracles are API providers who operate an oracle which is visible on-chain. Hence data source can be traced easily and this contributes to the degree of decentralization. To add to transparency and decentralization of API3, the on-chain identities of first -party oracles are further published through off-chain channels. Hence, users can confirm the provider of the data they are utilizing within a specific time frame.
- Cost Efficiency: With the elimination of middlemen, fund used in maintaining their presence will be saved. Middlemen (third-party oracles) are paid for the services they render. They are also paid middlemen tax which is a method of incentivizing them against attacking the data feed. In a traditional blockchain oracle model, an API can be served by two or more third-party oracles which is not efficient when gas cost is considered. In API3 model, oracle number is reduced to one as the API provider operates his Oracle.
Demerit/CONS of API3
- Blockchain technology Unfamiliarity: Traditional API providers find the blockchain technology alien. They will definitely need to learn and become conversant with blockchain technology. This implies that API providers can not readily become first-part oracle to be able to operate a oracle node. How many currently existing API providers are willing to put the time and resources to get acquainted with blockchain technologies? This is the major reason why third-party blockchain are still in function and might not be going anywhere anytime soon (at least).
- Cost of operation: The cost of operating an oracle node is high. A lot of time and infrastructure is required. These resources (time and infrastructure) can be diverted to another project unless there is an assurance of future profit or possible subsides. This is another hindering factor that might not make API3 replace third-party oracles anytime soon.
- Geographical biding laws: Different laws guide different API providers according to the region they are operating from. Operating an oracle node would require API providers to use cryptocurrencies (especially because they must pay gas fees) and this might not be possible due to an API provider operating from a region where a particular or all forms of cryptocurrency is banned/ restricted. Many API provider get disqualified for operating their own oracle node due to this inevitable fact.
4- Future developments and new projects
API3 has been progressive ever since its inception. Data providers see it as an opportunity to have their data securely transmitted to their final destination without an intermediaries (at least not a third-party).
Fund Raising
In November 18, 2019, API3 raised an undisclosed amount from three investors in a pre-seed funding round. These investors include SOSV, Emurgo and dlab.
In November 12, 202, another raising round (Seed round) occurred where the sum of $3 Million was attained from 10 different investors. During the Seed round, the lead investor was Placeholder, a firm that invests in decentralized information networks. Other investors include CoinFund, Pantera, DigitalCurrency Group, Accomplice, Hashed, Rarestone, Solidity, Block0 and Equilibrium. Coindesk
Partnership
API has partnered with a number of organizations to promote its course. The most recent is TESOBE / Open Bank Project's 10-year development partnership which was made to unite traditional financial services and decentralized web. The API3 Airnode enables blockchain developers to now have the capability of calling over 400 of Open bank project's APIs. Heikki Vänttinen had this to say about the partnership:
API3 is incredibly excited to see the blockchain industry begin to merge with open banking, and we can’t wait to see the innovative solutions that will grow out of this. We hope this newfound connectivity between the two will build a foundation for the future of a digital banking experience inclusive of blockchain-enabled systems like DeFi
Social Media
API3 is actively update their twitter, reddit, telegram, medium, discord, linkedin and github accounts. Two days ago, August 10, 2021, API3 on their Twitter account announced the API3 alliance, with a collective of more than 125 API providers using the API3 airnode to make their data and features available to the blockchain world. More information on this can be seen on their medium channel.
Conclusion
The blockchain usage is growing and expanding as times goes by. Many functionalities are being added of which many is made possible by interaction with the real world. Thanks to the invention of blockchain oracles, the possibilities have become endless. Real life data such as football match score, election results, weather forecast, highest rated movies, songs at the top of the billboard can now be sent to blockchains.
Even as the development of third-party oracles, there exist some problems such as data security and cost efficiency which the API3 is set to tackle. This sets API3 apart from previously existing oracles such as ChainLink. Banks can now directly send data to blockchain smart contracts eliminating middlemen. Users of such smart contract will be rest assured that their transaction is at low risk of third-party manipulation. Data are really compromised with the API3 model.
In the years to come, as more industries and organization partner with API3, it will most definitely successfully compete with oracle giants like ChainLink even to the point of totally eliminating them.
Hello, @ Thank you for participating in Steemit Crypto Academy season 3 week 7.
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