Decentralized Autonomous Organizations DAOs provide hands-off governance for blockchain projects. One of the more recent projects disrupting this space is API3. The project aims to tackle the ‘Oracle problem’ acting as a solution to connect APIs from data providers.
Building the decentralized API network (dAPI) drew plenty of attention during the project development. Crypto enthusiasts dub it ‘The Chainlink Killer’ but is it?
This review looks at the API3 project in detail and how to buy the native API3 token. Does it offer value to the ecosystem? We’ll discuss how it works and how it solves these Oracle problems.
Where to Buy API3
This section is our top picks of where and how to buy the API3 Crypto token. We chose these based on our experience of using them and considered fees, security, payment options and reputation.
eToro: Our Top Pick & Easy to Use Platform
Binance: Largest Crypto Exchange with Low Fees
Binance US: Binance for users in the USA
Coinbase: Highly Regarded and Easy to Use for Beginners
Kraken: Top Platform With High Liquidity
Visit The Top Pick
eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
eToro: Easy to Use Platform
eToro is the one of the best exchanges to purchase crypto coins & tokens. It is one of the most popular social trading platforms in the investment space. This exchange gives traders and investors full access to trade over 78 crypto assets, including Bitcoin, Ethereum, and many more.
The broker’s user-friendly interface and simple layout is appealing to investors with no prior knowledge of crypto trading. To begin a trading journey on eToro, investors have to create an account. With a minimum deposit of as little as $10, US and UK-based investors can purchase tokens and other crypto assets seamlessly.
Investors also enjoy zero fees on all USD deposits, including debit card deposits. However, there is a standard fee charge of $5 on all withdrawals, a 1% flat fee for every completed trade on the platform, and a $10 inactivity fee charged monthly after an investor fails to trade for a year.
The broker offers seamless deposit methods that range from bank transfer and direct crypto deposits to debit/credit card and payment processors like PayPal. Although all USD deposits are fee-free, all bank transfer deposits have a fixed minimum of $500.
Another major feature that makes eToro stand out is its impressive CopyTrader feature. This integration enables novice investors to find well-experienced traders on the platform and copy their trade strategies to earn when they earn.
In terms of security, eToro scales to the top as it features two-factor authentication (2FA) protocol, advanced encryption, and masking technologies to secure all users accounts. eToro accepts users in over 140 countries and is regulated by top financial authorities like the U.S. Securities and Exchange Commission (SEC), Financial Conduct Authority (FCA), Australian Securities and Investments Commission (ASIC), and the Cyprus Securities and Exchange Commission (CYSEC). The exchange is also registered with the Financial Industry Regulatory Authority (FINRA).
Overall best social trading platform to buy
CopyTrader and CopyPortfolio
Highly regulated broker
Charges an inactivity fee
Charges a withdrawal fee
eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.
Binance: Reputable Exchange with High Liquidity
Binance is the largest cryptocurrency trading exchange in daily trade volumes. The exchange offers investors full access to trade over 600 crypto assets.
The renowned platform also features a well-detailed learning curve and advanced trading tools that support well-experienced traders and investors looking to learn how to buy different cryptos. Although Binance features a user-friendly interface that facilitates a great user experience, it is more suited for well-experienced traders.
Binance has a minimum deposit of $10. This enables investors to kickstart their investing journey with low fees. Investors can also initiate deposits through seamless payment methods like wire transfers, credit/debit cards, peer-to-peer (P2P) payments, and other e-wallet solutions.
Binance deposits come with a fee that varies based on the payment method used. For instance, the global exchange charges a standard fee of up to 4.50% for all deposits made with a debit/credit card.
All investors enjoy very low fees when trading on Binance, as it charges a standard trading fee of 0.1%. For investors that buy using Binance token (BNB), a discount of 25% on trading fees will be applied.
In addition, investors can rest assured that their funds and data are well protected whenever they trade on Binance. The broker features top-notch security measures like two-factor authentication (2FA), cold storage to keep most coins, whitelisting, and advanced data encryption to protect funds and data. Binance functions effectively in over 100 countries and has a spin-off regulated platform (Binance.US) that tends to US-based traders and investors.
Trading fees at 0.01%
Wide range of payment methods
600+ crypto assets in library
Interface is suited for advanced traders
US-based customers cannot trade most coins via its subsidiary
Coinbase: Simple & Easy to Use Exchange
Coinbase is also a great option for investors looking for how to buy the crypto seamlessly. The US-based crypto trading platform enables users to buy, sell, and stake cryptocurrencies with zero complexity.
Coinbase integrates a user-friendly interface that simplifies crypto trading. The crypto trading platform supports well over 10,000 blockchain-based assets.
The exchange’s signup and verification process take less than 10 minutes. For traders looking to invest easily, Coinbase is a great alternative to Binance.
Coinbase has a minimum deposit of $2, the lowest minimum deposit in the market presently This exchange also offers a wide range of deposit methods like automated clearing house (ACH), Wire transfer, debit card, and e-wallet solutions, as well as cashouts in local currencies like USD, GBP, and EUR. Coinbase charges up to 3.99% for debit card deposits.
Investors enjoy a 4% cash back reward whenever a Coinbase debit card is used for crypto purchases.
For fees, Coinbase charges a competitive fee of 0.5% – 4.5% depending on the payment method, cryptocurrency type, and transaction sizes.
Coinbase has evolved from a traditional exchange to a versatile platform with great services dedicated to retail and institutional investors, such as an in-built exchange wallet, self-issued cash back visa card, staking, derivatives, asset hubs, ventures, and many more.
Furthermore, Coinbase has in-built security practices like 2FA verification as an added security layer to investors’ usernames and passwords, crime insurance that secures digital assets from theft and fraud, and many more.
Also, Coinbase is licensed by the Securities and Exchange Commission (SEC) and regulated by top financial authorities like Financial Conduct Authority (FCA), Financial Crimes and Enforcement Network (FinCEN), and the New York State Department of Financial Services (NYSDFS).
Licensed and reputable platform
Insurance in case of hacks
Low minimum deposit
High fee compared to competitors
No credit card deposits for US customers
Kraken: Top Crypto Platform with High Liquidity
The exchange has built a reputation as being a secure destination for anyone interested in trading cryptocurrencies and it is also a popular choice for both traders and institutions across a variety of locations.
Kraken retains an international appeal and provides efficient trading opportunities in numerous fiat currencies. Kraken is also the current world leader in terms of Bitcoin to Euro trading volumes.
Kraken is most well known for its Bitcoin and Ethereum to cash (EUR and USD) markets; however a wide range of both fiat and cryptocurrencies are tradable on the platform
Dedicated service for institutions
Great for beginners to use
High trading liquidity
The lengthy ID verification process
What is API3?
To grasp the concept of the API3 project, we must understand how it works. API stands for ‘Application Programming Interface.’ It’s a well-documented protocol enabling the transfer of services and data. APIs are commonplace in the app development community, with most programmers being familiar with the technology.
An example of a functional API is the protocol designed to provide pricing data to cryptocurrency exchanges and aggregators, such as Coinmarketcap.com. The API has many useful applications, and it can monetize data in scenarios where data providers allow access to that data by developers for a fee.
Create trustless applications that interact with Web APIs
This structure allows developers to build apps efficiently without creating everything themselves. We could think of APIs as a set of Lego blocks. Developers choose what they require from the API and connect it to their applications. The reality is that many apps would fail to launch or function without API.
This concept sounds like a dream for developers. However, the evolution of the space to dApps and Web 3.0 presents a few problems. The issue is that API infrastructure isn’t compatible with this new technology.
This stage is where API3 promises to make it possible for older API data providers and users to connect data sources to smart contracts. This functionality is possible without connecting to third-party intermediaries. API3 accomplishes this through the decentralized API network.
What Is the Value in dAPI?
Oracle technology was supposed to act as the data provider to smart contracts before the creation of API3. One of the leading technologies in this space is the Chainlink project. Chainlink has a node sitting between its API provider and smart contract.
The issue with this infrastructure is it adds a new intermediary, completing the function of removing the third-party solution in the process. The problem with the design is Oracle networks are typically rent-seeking. This issue means the cost of the process continues to rise.
Since the Chainlink project is a dominant oracle network, it’s gaining a sole monopoly over all related data feeds. Unfortunately, this process creates a type of centralization. There’s also no means to govern data provided to Oracles.
Unfortunately, the nodes are neglected and chastised for providing incorrect or corrupt data. However, there are no penalties enforced on the provider.
What Is the Chainlink?
Chainlink distributes requests across data sources and oracles. API3 thinks the solution to the issue is allowing API providers to operate their nodes themselves. This model institutes competition, lowering the inflationary mechanism in the system while promoting decentralization. This structure gives the influence to govern the data provider.
The huge growth of the DeFi economy means it’s critical for apps to source reliable and trustworthy data. It also ensures the process is completely transparent. With the API3 system, oracles will own the services provided and the data turning them into ‘first-party’ Oracles.
This design increases decentralization and allows transparent curation of the data feed, which is critical in all DeFi applications.
The Oracle Problem
The Oracle problem is one of the central issues facing the implementation of smart contracts. The problem becomes apparent when on-chain smart contracts have enforceable rules and functions. However, this goes out the window when you realize it’s only useful for data already on the Ethereum network.
Unfortunately, there’s no way to build a smart contract around asset prices like stocks or precious metals when the data source is off-chain. This issue is the core of the Oracle problem. The challenge is to place this data on-chain and execute it in a trustless, decentralized manner.
In addition, there must be protocols in place to verify the data and its source. When we rely on Oracles, we increase the vulnerable attack vectors in the smart contract and the Oracle provider. Blockchain engineers have looked for a solution to this issue since the development of smart contracts.
Some solutions, like Gnosis and Augur, implement the approach of prediction markets. However, the preferred strategy is an Oracle provider delivering data cost-effectively and anonymously without third-party interventions. This design formed the basis for the development of Chainlink.
Chainlink On-chain Oracles
If we consider the state of these Oracle-based solutions, Chainlink takes center stage. It’s the preferred Oracle solution, making huge strides in the blockchain development community in recent years. The LINK project has a robust community, with the LINK token positioned as a blue-chip token with plenty of utility.
However, it’s important to note that while LINK does solve many issues, it does have problems. That’s where API3 steps in to provide the best solution. API3 presents the best solution to the Oracle problem, making it indispensable to devs.
The API Problem
So, the Oracle problem is merely a simple oversight in smart contract development on the ETH network. Oracle development neglected to consider node decentralization when collecting and distributing Oracle data.
The reality is the issues Oracles solve aren’t as challenging and complex as you might assume. Essentially, what the Oracles are attempting to solve using a complex method, pulling off-chain data to on-chain contracts.
In this respect, Oracles compare with APIs in mobile and web applications. They achieve this since the solutions are required to deliver data to end users.
The API3 Solution
Let’s look at how API3 resolves these issues. We know there are several issues with delivering accurate and secure data on-chain to smart contracts. Can API3 solve the problems effectively compared to the current Oracle solutions?
Beacons allow smart contract developers to connect Web3 applications
Essentially, API3 takes the value passed on to the nodes in Chainlink, delivering it to the data providers. As a result, the process removes the middleware, optimizing it. Instead of placing nodes between data providers and smart contracts, API3 simply turns the data providers into nodes.
This strategy removes unneeded, additional, and redundant layers, solving several problems that Chainlink is working on. It also presents a viable solution to Chainlink’s scaling issues as the protocol grows.
API3 Token Use Cases
The API3 technology intends to use its decentralized autonomous organization (DAO) for governance protocols. This strategy means participants in the Chainlink ecosystem have a say in network security and development.
The API3 ecosystem relies on the API3 token for the following functions.
Collateral – The API3 staking pool acts as collateral for on-chain insurance.
Staking – API3 holders stake API3 to participate in on-chain governance and earn rewards.
Governance – The API3 token provides a direct incentive for governance, like voting. Users that stake API3 receive a portion of the dAPI revenue. Their staked API3 tokens provide collateral for on-chain insurance.
Disputes – dApps can open disputes and raise insurance claims in the case of lost revenue due to downtime, malfunction, or incorrect data. The dev team intends to use this functionality to resolve insurance claims.
Payments – The dev team intends to charge a subscription fee for those dApps utilizing the dAPI network. Data providers will receive rewards in API3 tokens.
Decentralized governance is a requirement for most blockchain projects in the modern era of web 3.0. API3 plans to cover this issue by incorporating a DAO governance protocol.
This structure adds value to the tokens beyond a simple monetary specification. It means holders of API3 tokens and those staking them get a say in the governance of the blockchain and the execution of any changes that occur.
Those users holding or staking API3 tokens decide on updates to governance changes, such as the fee structure. This structure allows no single point of failure in the direction and governance of the project’s development and operations.
Considering that API3 will operate as a data marketplace, this functionality will be incredibly powerful, making for a bullish sentiment on the API3 project and its future.
The API3 DAO
The governance of the API3 protocol includes a staking mechanism. Staking allows for governance and voting. However, it also provides an incentive for users to stake their API3 tokens as insurance against malfunctions or data errors in the system.
While it might be somewhat naïve to assume these issues won’t occur, the model insinuates that these occurrences are minimal. We’ve seen similar data errors occur on other API platforms. So, it’s good to see that API3 acknowledges a solution for altering the possibility of this occurring.
The deflationary effect is another benefit API3 offers to users that choose to stake their tokens. This structure allows the community to maintain a stable market price, reducing volatility in the API3 price action in the market.
The API3 Token
In November 2020, API3 conducted its private funding round, raising $3 million for the project. A public sale of API3 tokens in December 2020 was a success, giving the ecosystem the funding it needs to develop and execute the protocol and network.
The public sale raised a staggering $23 million for the project, showing the interest in the utility API3 offers the dApp community. The API3 tokens went on sale using a bonding curve, beginning at $0.30 and eventually reaching $2.00.
The project experienced widespread adoption in the dApp market, experiencing a 1,300% increase in price during the mania of 2021. Despite losing much of that value in the crypto winter of 2022, it remains a viable project.
API3 tokens have a total circulating supply of 100,000,000 API3 tokens. The team sold 30 million API3 tokens in both sales, with ten million going to the private sale and twenty million going to the public sale.
It’s important to note the public tokens are unlocked, but the tokens sold in the private sale are subject to a vesting schedule of two or three years for the lock-up period. Early investors in the project stake their API3 tokens to receive incentive rewards for supporting the API3 ecosystem.
API3 Token Allocation
The API3 tokens started trading on exchanges on December 1, 2020. The initial price was set at $1.30, and it steadily rose in value as the hours passed. Within a week, the API3 token was trading at $2 each, producing a 30%+ return in just 14 days.
While there was a dip under $2 by the end of 2020, the 2021 mania saw the price moon to $964 before experiencing a slow decline to a less volatile price, holding a range between $1.05 to $2.00 in H2 2022.
API3 – Conclusion
Undoubtedly, API3 presents tremendous value to the DeFi space as blockchain adoption grows.
Devs can create complex, novel use cases, and those dApps created using the tech require better means of interfacing with third-party data providers.
While existing oracle solutions are somewhat functional, several design compromises lead to severe problems as solutions scale. As a result, we could experience compromised data sets and an increase in costs that make the ecosystem exclusionary.
In the case of data corruption and compromise impact could be massive. The highly automated design of dApps and smart contracts will experience any data corruption spread throughout the network. The API3 solution enables API providers to operate Airnode oracles, giving interoperability with all third-party providers in a decentralized process.
It ensures the API providers have the required incentive to produce high-quality, trusted data. When we consider the potential for significant returns offered to node operators in oracle systems, API providers will likely capitalize on the ability to provide services and data via the easy-to-implement Airnodes.
Unless we see something superior, it appears API3 brings a powerful solution to the Oracle problem by connecting conventional API services and decentralized blockchain tech. While it’s too early to assume API3 is the solution to the Oracle problem, it certainly looks promising.
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