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API3

API3 functions as a decentralized data oracle network, streamlining the incorporation of APIs into blockchain applications without relying on intermediaries. Its primary goal is to bolster data reliability and security for smart contracts and decentralized applications (dApps) by offering them top-notch, immediate data.

API3 emerged due to concerns about the centralization and vulnerabilities inherent in conventional Oracle networks. These systems frequently depend on third-party services to retrieve external data for blockchain platforms. API3's approach enables direct connections between APIs and blockchains, fostering a more decentralized and trust-reduced setting for dApps to function within.

What is API3 (API3)?

Accessing reliable data poses a challenge for smart contracts, but there's optimism about application programming interfaces (APIs) offering a solution to this issue.

API3 aims to facilitate the creation, management, and monetization of decentralized API versions on a large scale. With blockchain technology increasingly shaping various sectors like decentralized finance and supply chain management, the project emphasizes the importance of smart contracts delivering timely, dependable real-world data.

Launched in September 2020, API3's whitepaper highlights the prevailing issue with APIs: lack of direct connectivity for smart contracts to access current data. This situation resulted in the rise of oracles to bridge the gap, albeit leading to the "Blockchain Oracle Problem." 

Oracles, acting as intermediaries between APIs and smart contracts, introduce elevated costs and centralization. API3 seeks to tackle this challenge by empowering API providers to manage their nodes directly.

Founders & History

Established in 2020 by a team comprising experienced blockchain developers and entrepreneurs like Heikki Vänttinen, Burak Benligiray, and Eray Sabancilar, API3 addressed a critical flaw in existing Oracle solutions, reliant on easily manipulable centralized third-party services. They designed a decentralized Oracle solution to ensure off-chain data sources' security and reliability.

In November 2020, API3 conducted its initial coin offering (ICO), raising $6.5 million for platform development and forging partnerships with other blockchain projects. In early 2021, API3 announced a collaboration with Chainlink, a prominent decentralized Oracle provider, aiming to enhance the security and reliability of Oracle solutions.

Currently, API3 stands out as a promising decentralized Oracle project. Its unique architecture, leveraging the Airnode concept, receives acclaim for providing trustworthy and tamper-resistant data sources within the blockchain community. With expanding partnerships and diverse use cases, API3 appears positioned to significantly impact decentralized application development in the future.

How Does API3 Function?

API3 perceives the oracle problem as a misunderstanding, leading to the development of inadequately suited oracles. Third-party oracles like Chainlink present various issues. They might lack transparency in their data sources, potentially providing inconsistent or unreliable information. Furthermore, they tend to be expensive for data consumers and susceptible to exploits and delays.

According to API3, the core problem lies in API connectivity if API providers possess the required data and services for blockchains but face challenges in providing access. This perspective allows API3 to introduce the third generation of blockchain applications by integrating APIs as decentralized APIs (dAPIs) on-chain.

The project operates on a fully decentralized and secured basis, governed by the API3 DAO and fueled by the API3 token. API3 functions as a multi-layered, cross-chain serverless protocol, presently linked to over 120 data feeds and deployed across 11 blockchains such as Ethereum, Fantom, Polygon, Optimism, and Arbitrum.

What Sets API3 Apart?

Within the realm of blockchain and cryptocurrency, many initiatives target integrating this technology into established sectors like real estate and finance. However, API3 stands out by addressing some of the prevalent issues within the blockchain sphere itself.

APIs play a pivotal role in supplying off-chain data to blockchains. Without this data, decentralized ledgers would lack crucial information regarding the valuation of cryptocurrencies.

In highlighting API3's uniqueness, Vanttinen emphasized how decentralized APIs can offer "enhanced data transparency right down to the factual data source level, a feature not found in existing decentralized oracles, which typically do not encompass the data source API within their framework."

To actualize API3, a lightweight and robust middleware known as Airnode has been developed. Its distinctive attributes lie in its rapid deployment, which takes mere minutes, thereby bolstering transparency and significantly reducing transaction fees.

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