Cryptokoin.com – Proposing to do better when it comes to solving the “Oracle problem,” or the way blockchains connect to external data sources, API3 creates a transparent methodology for combining blockchains with the APIs of data providers. This means that an alternative is provided to Chainlink, the decentralized oracle service that has truly become a monopoly in the world of data streams and smart contract blockchains. In fact, the popular news source CoinDesk uses the terms “Chainlink Killer” for API3.
API3 has raised $3 million in a private funding round led by Placeholder and with participation from Pantera, CoinFund and Digital Currency Group. API3 partners are as follows:
Because blockchain nodes are consumed by consensus, some data providers need to obtain external information through oracle nodes, which are a kind of middleware between the ledger and the API. According to API3 co-founder Heikki Vänttinen, this mediation function; It is run by agents running the nodes on Chainlink and in turn running an opaque management system.
Vänttinen said that a better solution is to let API providers run their own nodes. In this way, the process of managing the improvement of data flows can be done in a transparent and decentralized way.
“We saw some shortcomings in Chainlink, mainly in the way it runs data feeds on the oracle network as a whole,” said Vänttinen, one of the first Chainlink node operators. “The core team is a kind of central black box for data flows; It unilaterally decides which nodes will serve which data feeds, and also from which APIs these nodes serve data.”
Chris Burniske from Placeholder used the following statements:
“Chainlink, the largest oracle system by net worth of crypto, consists of data-selling intermediaries whose origin and quality are questionable. Despite being heavily marketed, Chainlink has not been designed or maintained well enough for crypto or DeFi to remain a long-term solution for information needs. Those who trust Chainlink do so at the risk of their own users. Join API3.”
What exactly is API3?
“API3 is a collaborative effort to build, manage, and monetize decentralized APIs (dAPIs) at scale,” Vänttinen wrote in a paper titled “API3 – Decentralized APIs for the Decentralized Web.” ” statements are included.
dAPIs are blockchain-native, decentralized API services created by combining multiple provider-operated oracle nodes into data streams, without the use of third parties. In addition, to achieve an end-to-end decentralized system, supported by both the dAPIs and the API3 project as a whole, the API3 token and the API3 DAO; will have a completely open and direct governance model from the outset.
What is API?
To properly understand API3’s value proposition, one must first understand what APIs are and how these standardized data and service interfaces are transforming the way applications are built today.
An Application Programming Interface, or an API for short, is a fully defined and documented protocol used by both web and mobile applications that allows them to interact with each other through the exchange of information and services. Online businesses today channel their data and services using an API; as monetizable service modules that developers can then integrate into their applications. This significantly increases software creation efficiency in terms of both cost and build time. Compared to a past where developers would have to build every function of their app from start to finish; It is clear why the huge productivity gains provided by APIs have made them the most important building blocks of the digital world.
Why are APIs relevant to smart contracts?
As the use cases of blockchain technology have evolved over the past decade from cryptocurrencies like Bitcoin to smart contract platforms like Ethereum to the recent boom in DeFi (Decentralized Finance), the evolutionary line DeFi use cases drawn through these developments has provided a relatively clear path. What this path demonstrates is not only expanding the capacity of blockchain-based applications to perform increasingly complex tasks in a minimized manner, but also a deepened link between decentralized applications and the real world. This has happened through smart contracts opening up towards services that go beyond simple ledgers for transferring value from one account to another and become more like democratized services and financial products long ago only provided by multinational corporations and large financial institutions.
A reality has been reached today that smart contracts and decentralized applications can be used to increase efficiency, reduce intermediaries and costs, and provide greater transparency in hundreds of real-world applications through dozens of legacy industries. Going beyond DeFi, smart contracts are poised to transform entire industries, from insurance to supply chain management to gambling. What all these industries have in common is that they rely on real-world data at the time provided by APIs.
The advantage of Chainlink
However, according to CoinDesk, a Chainlink Labs spokesperson said that a quick look at one of the widely used feeds such as ETH/USD reveals several leading data providers running their own nodes like Kaiko. “The Chainlink system has a significant advantage,” the spokesperson said. “It enables data providers to sell their data across multiple blockchains without the need to run any additional software. Chainlink not only enables data providers to run their own nodes, and many are already in production; it also allows them to sell their existing APIs to the Chainlink network with zero changes to their infrastructure.”
This purpose-built design decision gives Chainlink users access to a wider selection of data providers, the spokesperson said.
“This is a completely different advanced approach than API3, which requires all data providers to run and manage new infrastructure to get started. Chainlink’s resource-signed data capability is complemented by an even more important capability that allows smart contracts to access all APIs. This is an important feature that is clearly missing from API3.”
Vänttinen says the API3 approach makes it easy to set up as an oracle for API providers, from crypto price calculators to weather forecast APIs added to insurance applications. For the API3 Airnode, Vänttinen said, “it’s a very simple serverless function that the data provider can implement on the existing cloud provider platform – you set it and forget it.” Alternatively, he said, running a Chainlink node is “basically a full-time job.”
Chainlink, because API3 removes the reliability of each oracle running its own full nodes; pointed out that it would make this approach highly susceptible to things like the recent Infura outage.
A representative of Chainlink Labs said, “API3 does not have oracles running its own Ethereum or other nodes, which is to publish their results; means they have to rely on centralized third parties. This means that API3 is completely dependent on services like Infura. However, as we have seen recently, outages may occur. If we adapt this interrupt to API3, it’s an interruption that lasts for hours; It can lead to uneven market prices and therefore huge losses for users.”
DeFi well-being
With the recent DeFi boom, Chainlink node operators have been seen making money. For example, monthly revenues earned by each of the top three Chainlink node operators were close to $100,000 per month between August and October of this year. According to research done by The Block between August and October, ChainLayer earned more than $322,000, LinkPool $306,000, CertusOne more than $293,000 and Fiews more than $282,000. September was a particularly good month for them, as all the top three nodes raised over $160,000 in said block earnings.
By contrast, API providers earn less and don’t even know their data is being resold in these apps, Vänttinen said. Vänttinen stated that the monthly subscription fees paid to these providers by the node operators can vary between $100 and $200 per month, perhaps up to $400; He added that the terms and conditions of these subscriptions generally prohibit the resale of data by third parties.
Burniske said, “With its Airnode design, API3 makes it seamless to transfer information from primary data providers to the crypto network with zero blockchain expertise. “This means that the reputation and quality of existing data providers can move into the crypto world and simultaneously allow these assets to profit from crypto participation.” He also used the following statements:
“In addition, API3’s enterprise DAO structure provides a framework for truly decentralized on-chain data flows, which the team calls dAPI.”
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