What is API3?

One of the most important infrastructure services that DeFi can't live without are oracles. Sure, you've heard about projects like Chainlink and its growth potential. As more projects require reliable off-chain data for building new use cases, it becomes clear that the crypto space needs more than just one oracle. Which is why we present you API3, the underdog of decentralized oracles.

To explain API3, it is important to mention the "oracle problem," or "how can we securely and accurately bringing off-chain data onto the blockchain?" While blockchains are designed to be immutable and secure, they are limited in their ability to access and use real-world data. Someone or something has to gather that data and feed it into the blockchain.

For example, let's say you want to create a decentralized weather insurance app. The app needs to access real-time weather data to determine if there has been a weather event that would trigger an insurance payout. However, this data is not stored on the blockchain and must be accessed from an external source, such as a weather API.

This is where oracles come in. Oracles are third-party services that provide data to a blockchain-based smart contract. However, this introduces a new problem: how can we trust the data provided by the oracle?

One solution to this problem is to use a decentralized oracle network, such as API3, which is governed by a DAO and designed to be more resistant to attacks and transparent in its data validation process. To ensure fair and transparent governance, API3 has its own governance token called API3. The price of API3 is tightly correlated to the number of oracle users. As API3 continues to integrate more data feeds from the outside world, the DAO is tasked with offering grants to teams that develop API3.

Various aspects of the protocol (i.e integrations, payment processing, UX/UI) are handled by external developers. In order to secure API3 against hacks or malicious actors, the job of the DAO is to monitor the development progress each step along the way.

To this date, API3 has never been hacked. Furthermore, dapp developers need not trust API3 as all data feeds aka Airnodes are owned and operated by an API provider. Therefore the Airnode operates under the complete autonomy of the API provider who's signed data is used to update the data feed values.

How does API3 work?

API3 is the first truly decentralized data feed oracle. In other words, it allows Dapps to access off-chain data sources in a secure and transparent way. 

The core product of API3 are Airnodes, a type of middleware that allow for the secure connection between API3 smart contracts and off-chain data sources. They are responsible for securely retrieving and processing data from the data sources and delivering it to the smart contracts. Airnodes also ensure that the data is delivered in a format that is compatible with the smart contract, and they provide cryptographic proof that the data has not been tampered with or altered in any way.

API3 Airnodes are designed to be highly customizable and adaptable to a wide range of data sources and use cases. They can be configured to retrieve data from various sources, including APIs, web pages, databases, and other off-chain systems. They are also designed to be highly scalable, enabling them to handle large volumes of data requests in real time.

Under the hood, API3 Airnodes are built using the cloud computing platform AWS Lambda, which allows them to be highly scalable and cost-effective. Each Airnode is a lightweight serverless function that can be deployed and run on-demand. This architecture ensures that Airnodes can handle large volumes of data requests in real-time, while keeping costs low.

A key advantage about Airnodes is that they are designed to be decentralized, meaning that they can be run by anyone, anywhere in the world. This ensures that the network is resilient and secure, as no single entity can control all the Airnodes. The API3 network also includes a governance system that allows token holders to vote on key decisions related to the network, including the addition of new Airnodes.

API3 Airnodes can be used in a variety of blockchain applications, including DeFi, gaming, and insurance. For example, Airnodes can be used to provide price feeds for DeFi applications, or to provide weather data for crop insurance.

API3 dAPI

A key part of the API3 toolkit is dAPIs. These managed API services are on-chain data feeds sourced from off-chain first-party oracles owned and operated by API providers themselves.

In traditional web development, APIs (application programming interfaces) are used to allow different software applications to communicate with each other. dAPIs work similarly, but they are specifically designed to allow dapps to communicate with each other on a blockchain network.

A dAPI can be thought of as a set of protocols and rules that allow a Dapp to access the functionality of another Dapp. For example, let's say that you have a Dapp that allows users to buy and sell digital art on a blockchain network. You might want to integrate a dAPI from another dapp that provides identity verification services. By integrating this dAPI, your users can verify their identity on the blockchain network, which can help to prevent fraud and increase trust in your platform.

For users to access dAPIs, they can head to the API3 Market and explore all the dAPIs available on a range of EVM-compatible chains as well as their testnets.

How to make money on API3?

Unless you plan on building your own dapp and use API3's oracles, the ways of making money on API3 are limited. Let's say you have bought some API3 tokens and you plan on making profits without having to build your own dapp. In this case you can stake your API3 tokens for a secure yield. 

API3 has come up with a clever way of ensuring the stability of its services while rewarding users who participate. This is how they've come up with the coverage staking pool.

By staking your API3 tokens into the coverage staking pool, you take part in providing API3 users with concrete security guarantees in the form of coverage. Coverage staking pool funds are used to cover potential financial losses from dAPI malfunctions that the dAPI consumer might incur. As you stake API3 to the coverage pool, you generate shares in the API3 DAO.

Staking can be done directly via API3 or using third party staking services. Here's how you can stake your API3 directly via their platform:

1. Open the API3 Staking page

2. Click on ‘’+Deposit’’ button

3. Confirm the number of API3 tokens you want to deposit and approve the transaction

4. Once you have deposited your tokens click on “+Stake” button

5. Input the number of tokens you would like to stake

6. Profit

The rewards you get from staking have a one-year lock-up period and your staked balance has a 7-day lock-up period. These are lock-up risks associated with staking that could affect the overall value of your position in dollar terms, depending on the market price of API3. You can check the APY from staking your tokens in real time. 

Price Prediction for API3 — Can it hit $1000?

Buying and hodling API3 — the native token of the API3 — is one way of potentially making money on API3.

The main utility for the API3 token is to act as the governance token on API3 DAO. Token holders need to stake their API3 tokens in order to vote and get rewarded in API3 tokens. The lockup incentive helps reduce the circulating supply of API3 tokens, but it also results in more inflationary rewards.

Over time, the API3 DAO may decide to influence the amount of staking rewards in order to preserve the value of the token.

By looking at its current price, it’s natural to think about the chance of API3 hitting $100 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.

Let’s examine the potential growth of the API3 token by analyzing its tokenomics. API3's current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} API3 tokens being in circulation today, that means a price of {PRICE} per API3.

How did we come to that calculation? It’s quite easy, the price of an API3 token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each API3 coin. 

By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of API3 at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for API3 to hit that price.

At a price of $1000 per token, that means the current market cap of API3 would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $10. 

Now let’s shift our attention to the fully diluted market cap.

Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.

The fully diluted market cap represents the total value of a coin if all tokens were in circulation. API3’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} API3 which means that no more coins above that number will ever be created.

These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.

How does this impact the price of API3? Taking into account the current price of an API3 token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. API3 coins that have been burned are not taken into consideration because they have been permanently removed from circulation.

Whether it seems gigantic or not, the number we came to above only takes into account the current price of an API3 token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the API3 protocol fully diluted market cap.

These are all crucial details to know when calculating if API3 can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.

The future of API3 depends solely on its growth as a network used by tens and hundreds of millions of users. With an ever increasing need for decentralized price feed oracles, it isn't out of the realm of possibilities for the price of API3 to reach $1000 by 2030.

If you’re looking to add some API3 to your portfolio, the most trusted places to get some are Binance and Coinbase.