API3: a bridge connecting the blockchain and the digital world

If you've been following the series since the beginning, glad you already know the main elements and ideas of API3's design. This post simply shows how they fit together to solve the API connection problem.

Internal actors and entities

Decentralized APIs (dAPIs)

dAPI is an on-chain data feed consisting of aggregated oracles from first parties (operated by API providers). This system allows for the removal of many loopholes, unnecessary redundancies, and middleman taxes created by existing third-party oracle solutions. Additionally, using a first-party oracle leverages the off-chain reputation of the API provider (compared to the nonexistent reputation of an anonymous third-party oracle). See our article "First-Party vs Third-Party Oracles" for a more detailed discussion of these issues. Furthermore, dAPIs are data sources built on transparency. By this we mean: you know exactly where the data is coming from, which ensures data quality as well as source independence to mitigate bias in aggregated results.

Signum Capital announced the establishment of the UVM Signum Blockchain Fund: Official news, Signum Capital announced the establishment of the UVM Signum Blockchain Fund (UVM Signum Blockchain Fund), which is the investment arm of Signum Capital and UOB Bank, UOB Ventures The joint partnership project of the management company (UOB Venture Management) will focus on four key areas: infrastructure development and enhancement, financial services and systems, asset tokenization platform, and other applications and tools. [2021/12/16 7:43:43]

Staking Pool

Unlike staking at the oracle level - which is impractical and arguably infeasible for reasons mentioned in this post - API3 does however have a staking pool.

API3 holders can stake the protocol. Staking is backed by an insurance service that protects users from potential damage caused by dAPI failures. The staking facility enables participants to share the operational risk of API3 and incentivizes them to minimize it. Participating in the protocol also allows stakeholders to receive inflationary rewards and share profits.

Grayscale cooperates with iCapital Network to provide consultants with digital currency investment strategies: Jinse Finance reported that digital currency asset management company Grayscale (Grayscale) and financial technology platform iCapital Network1 announced the establishment of a partnership, through Grayscale’s diversified market capitalization-weighted investment strategy, Provides access to digital currency to iCapital Network's 6,700+ advisors. iCapital advisors and clients can now seamlessly access Grayscale's leading digital currency investment strategies. [2021/9/14 23:22:42]

The API3 DAO

API3 DAO controls dAPI. DAOs decentralize the governance of a project, and how funds are spent. In this article we explain what decentralized governance means, why it is essential to complex protocols, and how it benefits dAPI users through its transparency and scalability.

Eden Network Completes $17.4 Million in Seed Round Financing Led by Multicoin Capital: Jinse Finance reported that Eden Network, the Ethereum priority transaction network, raised $17.4 million in seed round financing led by Multicoin Capital, with participation from Jump Capital , Alameda Research, Wintermute, GSR and Defiance Capital, as well as angel investor Yearn.Finance founder Andre Cronje and Genesis Capital derivatives director Joshua Lim participated in the investment.

The new funds will be used to support the adoption of the new network by developers, miners and users. Eden aims to protect Ethereum traders from the threat of miner extractable value (MEV).

Note: Eden Network is a project initiated by the Archer DAO team. The team raised $1 million last year through the ARCH token sale. EDEN tokens now represent a technological upgrade to ARCH tokens, and ARCH holders can upgrade 1:1. In addition, Eden Network was officially launched in early August, aiming to resist malicious MEV attacks. (Cointelegaraph) [2021/9/8 23:10:24]

External actors and actions

News | Bchd has developed a public API that can replace BCH full nodes: According to bitcoin.com, Bchd developers announced that they have written a gRPC API that can replace BCH full nodes in go (golang) language. It provides users with a high-performance and reliable server, with features such as fast sync mode, which allows the client's initial chain to be downloaded synchronously in record time. The node also includes properties such as BIP113, 157, 158 and an adjustable block size cap. [2019/5/4]

API provider

One of the fundamental flaws of existing oracle solutions is the attempt to establish and maintain parasitic connections to data sources, which cannot produce a sustainable ecosystem. Instead, we first recognized that the API provider was the engine of the project. So instead of being spun off, they are vested and compensated so that their interests are fully aligned with those of the larger API3 ecosystem.

API providers provide data to on-chain dAPIs through Airnode. They will be compensated regularly at a fixed rate, which will fit into their existing pricing model. These are done using stablecoins wherever possible. (Note that some API providers explicitly refuse to accept cryptocurrency as payment. In such cases, the DAO will provide a grant which in return will be paid to the API provider proving that the API provider received Monetary Compensation by Done.)

News | Skyway Capital, a crowdfunding platform suspected of investment fraud, enters the crypto industry: According to bitcoinexchangeguide, Skyway Capital, a crowdfunding platform suspected of investment fraud, recently announced that it will switch to the Skyway token and CryptoUnits project. After the announcement, however, the company needed to clarify that the two are different. These companies are all located in cash-friendly jurisdictions. Additionally, there appears to be little regulation in these jurisdictions, making it easier for companies to operate. [2019/3/26]

Stakers

As mentioned earlier, any API3 token holder can participate in the staking pool. In exchange, stakers gain a voice in governance through their share of governance tokens.

Decentralized governance requires well-balanced incentives that accurately model positive and negative outcomes. In other words, the governing entity should reward good outcomes and penalize bad outcomes.

The staking feature provides economic incentives for those who participate in API3 and contribute to increasing their income. Staking allows participants to share the operational risk of API3 and incentivizes them to minimize risk. Finally, the governance layer provides participants with the ultimate tools to implement these incentives.

dApps

Decentralized application (dApp) developers subscribe to dAPI, which is superior to existing solutions due to its transparent construction and cost-effectiveness (compared to unnecessary redundant third-party solutions).

Furthermore, uniquely, the security of dAPIs is quantifiable. See our article on quantifiable security, and our other articles on why existing oracle-grade solutions can't match. This means: If a dAPI user becomes aware of a fault, they will be able to assess the damage and be able to make an on-chain insurance claim. See section 6 of our white paper ("Measurable Security Through Insurance").  

Summary

API3 will connect decentralized applications with the rich variety of data and services provided by traditional web APIs - see our article on the definition, history, and central importance of APIs in the digital world. API3 will thus expand the applicability of blockchains without sacrificing decentralization. This will be achieved through dAPIs - fully decentralized and blockchain-native APIs - that will be setup, managed and monetized at scale by the API3 DAO.

Finally, we will highlight several features of the API3 design:

Security: dAPIs do not rely on third-party oracles, which is an ongoing and important risk factor in alternative solutions. See Section 3 ("Third-party oracle as middleman problem") in our white paper. In addition, the dAPI insurance service provides its users with quantifiable and trust-free security guarantees, which further consolidates API3's position as the most secure solution for decentralized applications to receive API services.

Robustness: Airnode adopts serverless technology and has strong anti-downtime ability. This, paired with a fixed-node design, is less susceptible to errors or adverse network conditions. Additionally, dAPIs will be governed by a DAO that maintains a self-regulating balance of risk and reward through carefully designed incentives, thus providing a robust risk mitigation framework. See Section 5.6. ("API3 Token Economy") white paper.

Cost-effective: dAPIs eliminate the middle man. They don't have to pay a middleman tax, which is a fee paid to third-party oracles to encourage them not to attempt an attack. See Section 3.2 ("Middleman Tax") in the white paper. In addition, a data feed composed of first-party oracles does not require excessive redundancy at the oracle level—the data feed achieves the same level of decentralization with fewer oracles, resulting in significant savings in Gas cost.

Finally, the API3 solution is flexible because of its decentralized governance, governed by the parties who actually participate in the game. Therefore, the project is not limited to the original design, but is constantly evolving to adapt to new challenges and needs.

In this series of blogs, we introduced the main ideas behind the design of API3. This final post brings these ideas together and shows how they fit into the problem of API connectivity to design API3 solutions. Finally, we recommend that you read our white paper, where all these concepts are discussed more fully and formally.

API3 would like to discuss with you how to make your API available to the blockchain.

Original title: API3: The Glue Connecting the Blockchain to the Digital World

iStock/smirkdingo, post-processing by author

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