What is The Graph?

The blockchain is capable of storing information about transaction and other state changes. With every block added, the question arises: "how do we organize that data in a meaningful way?" One of the key features of blockchain is its ability to store data in a decentralized manner, making it secure, immutable, and transparent. However, accessing that data is still complicated. For example, figuring out the previous owners of an NFT, or the swap history of a certain wallet can take hours to organize.

One solution could be to have a centralized party that will provide all this data, but it goes against the ethos of crypto. Another solution would be to deploy a processing data service, which is not that scalable as it requires a lot of resources. 

This is where the Graph comes in. The Graph is an indexing protocol that makes it easy for developers to access and query data from various blockchains and Dapps. It provides a unified and efficient way to index, search, and serve data from multiple sources, making it a valuable tool for developers building dapps. 

We can think about how the index in a book helps you jump to the key terms of a chapter instead of you having to go through the entire book. The same happens whenever we use Google to look for specific information, the browser helps us find it efficiently, saving us time and effort.

The Graph organizes blockchain data into open APIs, called “subgraphs”, that define which blockchain data will be indexed and how it will be stored. And then Indexers run the hardware that actually does the computational work of indexing data.

A DeFi user might not notice that the Dapp he is interacting with is using The Graph. For example, when we use Uniswap or Balancer to consult a token price, this information is being served by The Graph. 

What makes The Graph so valuable is that the protocol is decentralized, and invites anyone to contribute with their own subgraphs. Participation is not determined by KYC, accolades, or privileges. Instead, the most valuable subgraphs will naturally make it through the selection process.

To achieve the goal of decentralization, The Graph launched GRT, an ERC20 token that runs on the Ethereum blockchain. GRT is a utility token used to allocate resources on the network, where active participants can earn income based on the amount of work they perform.

The Graph is also governed by its community members, who can vote on Graph Improvement Proposals (GIP) for protocol upgrades. Then The Graph Council may choose to vote on the inclusion of the GIP into the protocol.

The protocol and the Foundation’s treasury are governed by The Graph Council, with support from The Graph Foundation, core contributors, and the community. The Council represents the interests of the five core ecosystem participants: Indexers, users, technical domain experts, initial team, and active GRT holders. The council follows a governance process and votes on Graph Improvement Proposals (GIPs), including technical upgrades and the core development roadmap.

In this format, The Graph has never been hacked. And we are not even talking about a protocol-level hack. The Graph is a blockchain querying service that deals with immutable data posted on the blockchain. If the respective blockchain gets attacked (e.g. 51% attack), then the threat will affect queried data for that blockchain.

As the protocol level, the curation process as well as the upgrades are reviewed by multiple parties, who have a direct incentive to signal the correct subgraph. In practice, malicious/sub-standard subgraph creators have a small chance of having their subgraph added by the curators. 

How does The Graph work?

The Graph derives it value from indexing blockchain data, which makes it easier for end users (e.g., developers or apps) to reduce the time required to find, query and use the desired information. The data is organized in open APIs, called “subgraphs”, that define which blockchain data will be indexed and how it will be stored. And then Indexers run the hardware that actually does the computational work of indexing data.

In order to deliver its services in a seamless manner, The Graph has three main actors: curators, indexers, and the end users. Let's start with the first category, the curators.

As previously mentioned, "subgraphs" are pieces of data extracted from the blockchain such as values, timestamps, fees etc. Anyone can create a subgraph which can then be used by the curators and indexers.

When a new subgraph is created, Curators determine if it is valuable and if it should be indexed by Indexers. Curators bootstrap a subgraph by using GRT to signal (mint shares) on quality subgraphs to attract Indexers. This is the equivalent of staking GRT in order to mint Graph Curation Shares (GCS).

Here's how curating works in practice: Curators deposit GRT into a bonding curve and mint GCS tokens to signal on quality. The process of curation is deemed risky, therefore Curators carefully weigh on which subgraph to signal.

Early Curators mint shares at the lowest price and then the price increases as more Curators mint new shares, to incentivize minting early. When a share is burned, the price of all shares decreases. Early Curators are rewarded more to help bootstrap new subgraphs.

Curators also receive 10% of all query fees generated on the subgraph, to incentivize them to keep the signal. There is a 1% tax upon initial curation that is burned. 

When a new subgraph version gets deployed, a Curator can choose to signal on a specific version of a subgraph, or they can choose to have their curation shares automatically migrate to the newest version. When a subgraph developer upgrades the version of a subgraph, a 1% upgrade tax is incurred. Half (0.5%) is paid by the subgraph developer, and the other half (0.5%) is paid by all curators with an auto-migrating signal.

With the subgraphs curated, it's time for the Indexers to take the lead. The job of an Indexer is to index and query services for the signaled subgraphs. Indexers run a node and are required to stake GRT to provide these services and earn query fees and Indexer’s rewards. The minimum self stake required to be an Indexer is 100K GRT.

There is a query marketplace where Indexers set the price of these queries based on the cost to index the subgraph, demand, curation signal, and the market rate for blockchain queries. 

Staking 100K GRT by yourself can be expensive, which is why delegators can contribute with GRT to Indexers and earn a portion of query fees and Indexer rewards. Delegators select Indexers based on their performance, reputation, activity level, and many other parameters.

Consumers are the end-users of The Graph. They query subgraphs and pay query fees to the Indexers, Curators, and Delegators. Users can set a max query budget in their subgraph, but they need to take into account that setting a max query budget too low will exclude Indexers, potentially leading to poor quality service.

There are two ways to interact with The Graph if you are not hosting your own subgraph: Graph Explorer, Subgraph Studio.

Graph Explorer is where users can explore different subgraphs and and interact with the protocol. By subgraphs we mean the APIs published by every project. Let's say you want to create your own DeFi app. In order to show the accurate swap prices across different blockchains, you can tap into the subgraphs created by their own teams, or create your own subgraph.

With Subgraph Studio users can create, manage, and publish subgraphs and API keys using Ethereum Mainnet. It is a powerful tool that is used by some of the most popular decentralized projects.

How to make money on The Graph?

Making money on The Graph requires some technical knowledge and at least 10K GRT to add signal to your subgraph, otherwise no one will notice it. Creating your own subgraph can be a sustainable path to passive income. Assuming that the subgraph you create receives support from curators, you are on your way to make 10% off all query fees generated by the subgraph. 

Okay, it takes a lot more technical knowledge than we can detail here. Luckily, their team has issued step-by-step tutorials to help you set up your own subgraph. It's worth giving it a shot!

Price Prediction for The Graph — Can it hit $1000?

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

By looking at its current price, it’s natural to think about the chance of GRT hitting $1000 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 GRT token by analyzing its tokenomics. GRT’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} GRT tokens being in circulation today, that means a price of {PRICE} per GRT.

How did we come to that calculation? It’s quite easy, the price of a GRT 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 GRT 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 GRT 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 GRT to hit that price.

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

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. GRT’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} GRT which means that no more coins above that number will ever be created.

The Graph has no maximum supply, which means there’s no cap on the maximum of tokens that can be issued.

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 GRT? Taking into account the current price of a GRT token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. GRT 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 a GRT 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 GRT protocol fully diluted market cap.

These are all crucial details to know when calculating if GRT 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 GRT depends solely on its growth as a network used by tens and hundreds of millions of users.

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