Diving into the Band Protocol Whitepaper: Motivation & Overview
Motivation
Whitepapers are commonly overlooked or misunderstood by the wider, non-technical community and it is not common practice for projects to simplify or walkthrough their respective whitepapers whilst explaining technical jargon to ensure common understanding.
We will be releasing a series of articles over the next two months that will break down the Band Protocol Whitepaper for token holders and the wider community to better understand Band Protocol’s vision.
Diving into the Band Protocol Whitepaper Series:
#1 — Band Protocol Motivation & Overview
#2 — The Band Native Token & Dataset Token
#3 — Incentivising Data Curation & Potential Limitations
#4 — Potential Use-Cases & Future Technical Goals
Introduction
Decentralized applications currently rely on centralized data providers that represent a single point of failure, security risks and ultimately defeat the purpose of being decentralized.
Band is an open protocol that facilitates the governance of data used in decentralized blockchain systems. The protocol functions as an open standard for data handling and data management.
In this introductory article, we will cover the underlying data availability problem, the need for reliable data, the motivation and importance behind Band Protocol as the new decentralised framework for data governance.
Band Protocol allows dApps to leverage existing data on the internet without trusted intermediaries, acting as a secure and scalable decentralized oracle on smart contract capable blockchains — Soravis Srinawakoon, CEO of Band
(This article will cover 1.1, 1.2, 1.3, 2.1, 2.2 from the whitepaper)
Data Availability Problem
The crux of Band Protocol’s solution is solving the data availability problem; existing data availability solutions either depend on highly critical central points of failure or are suffer from asynchronous* interactions which cause significant delays and also complicates smart contract logic.
*Asynchronous — a form of programming paradigm that allows a unit of work to run separately independent of the primary flow. When the work is complete, it notifies main flow to resume the execution (or stop if the work failed).
Until decentralized applications can interface real-world external data inputs into simple function calls*, there will be significant barriers in innovation and adoption of the technology.
* Function call — a request made by a program or script that performs a predetermined function. (You can think of a function call as a machine, by putting in a raw input of ‘flour’ I receive ‘bread’)
Need for Reliable & Trusted Data
Blockchains and smart contracts cannot access data from outside of their network — a decentralized application on Ethereum cannot use data from EOS or the real world. Hence, in the permissionless environments of decentralized systems, there lies an economic incentive to corrupt and attack critical data sources.
External data provided by a centralised/off-chain oracle* controls all the data inputs to a smart contract, granting it the sole ability to determine the response and behaviour of that smart contract. In essence, the oracle controls that smart contract — if the oracle is compromised, so are the smart contracts and systems that depend on it. This creates a significant weak point in the security and integrity of blockchain.
*Oracle — third party or decentralized data feed services that provide external data / off-chain data onto the blockchain
A Smart Contract Component Layer Solution
Band fits into the component layer, powering reliable and trusted data to decentralized protocols and applications. Applications using Band Protocol will consume data via Band’s on-chain public smart contract data points as opposed to oracles that are external to the blockchain.
Band’s data feeds are community-curated data sources, providing a framework for users and developers alike to self-moderate, curate and manage data sources for trust and reliability.
Band does not define how the data is collected, rather it provides the means for a community to collectively decide and vote how data will be used and curated. A dataset’s token value increases with usage and reliability, optimally incentivising community participants/stakers with a common goal of curating a consistent, reliable data source.
By creating a standard framework for the community governance of data, Band creates a socially scalable method for the widespread adoption and integration of trusted data that all dApps can utilize.
Unlike existing solutions which are limited to their own network, Band’s data interfaces are source and application-agnostic —Band can be applied for any purpose that the community governing and curating the data deems fit. Additionally, sources can be sourced from multiple sources (centralized external feeds or on-chain data aggregators) which can also be aggregated by using mean (average), median (midpoint) or majority (greatest frequency).
Use-cases will be discussed more in-depth in article #4 but some high level use-cases include:
- Asset Price Feed
Crypto-crypto, crypto-fiat, traditional security and commodity prices for decentralised financial services. - Real-World Event Feed
Sport events, IoT data outputs, real-world payment settlements, etc for prediction markets and decentralised betting applications to eliminate the middleman. - Identity Data
Relevant information such as accredited status, credit score, educational background and work experiences for decentralised exchanges and marketplaces. - Location Data
GPS location for any decentralized applications that need to leverage maps.
Band Protocol Overview
Band’s main functionality is to bridge the gap between decentralized applications and real-world data while also ensuring that data is accurate and trustworthy through economic incentives.
Band Protocol will initially be built on Ethereum but the protocol itself is not restricted to Ethereum infrastructure. Band will support all leading smart contract platforms and power the new generation of decentralized applications as the protocol gets more widespread adoption.
Existing Data Solutions
Steps using existing oracle solutions:
- Contract saves the state of the current transaction to the contract’s storage.
- Contract emits an event to request data query and stops the current transaction.
- Off-chain network waits for sufficient transaction confirms.
- Off-chain network invokes a callback transaction with the supplied query result.
- Contract validates the transaction, recovers the state, and continues execution.
Existing data provider network suffer from asynchronous interactions between smart contracts and data layers. This method complicates smart contract implementations and also introduces a significant delay (in the order of minutes on Ethereum) as two blockchain transactions need to be confirmed and executed sequentially.
Band Protocol’s Solution
Band instead provides an intuitive query interface for decentralized applications to receive real-world data as a simple function call to a static smart contract. Data providers such as exchanges and data aggregators (CoinGecko or CoinMarketCap) are responsible for inputting and curating data to the blockchain, making it ready for dApps to consume in 30–60 seconds as steps 3 and 4 are omitted.
Querying data on Band is simple to implement and only incurs a small gas cost overhead. This method scales with more applications using the same dataset as more data is readily available to be consumed by multiple parties; existing solutions require individual applications to perform redundant data query.
A Consortium of Data Governance Groups
Datasets inside Band Protocol are split into individual Dataset Governance Groups which are independent and have unique ‘dataset’ tokens. Dataset tokens are all collateralized by the Band Native Token through the bonding curve* mechanic. Furthermore, each dataset governance group utilizes its own unique ‘dataset’ token to stake, curate and govern its dataset through Token-Curated DataSources* (TCD).
More on TCD in article #3.
*Bonding Curve — a concept originally proposed by Simon Rouviere to ensure that the dataset token’s price always goes up as the supply increases, and dataset token holders always have an option to ‘exit’ by selling their dataset tokens to receive back a proportional amount of Band Native Tokens; more on this in the next edition
*Token-Curated DataSources — a method to curate objective data with high volume similar to the delegated proof-of-stake consensus.
In a Nutshell
- Decentralized applications currently rely on centralized data providers.
- Band is an open protocol that facilitates the governance of data used in decentralized blockchain systems. The protocol functions as an open standard for data handling and data management.
- Existing data availability solutions either depend on highly critical central points of failure or are subject to asynchronous interactions which cause significant delays and complicate smart contract logic.
- There is an economic incentive to compromise oracles to grant control of said smart contracts and thus the systems that depend on it.
- Applications using Band will consume data via Band’s on-chain public smart contract data points.
- Band’s data feeds are community-curated data sources and incentivise self-moderation, curation and management for trust and reliability.
- Band provides an intuitive query interface for dApps to receive real-world data synchronously as a simple function call to a static smart contract.
- Datasets inside Band are split into dataset governance groups with their own unique ‘dataset’ token.
- Dataset tokens are all secured by the Band Native Token through the bonding curve mechanic.
Conclusion
We understand that whitepapers can sometimes be hard to get your head around, please reach out to me on Telegram @kevinjlu if you have any outstanding questions or suggestions for improvements to this article or series.
We hope you enjoyed the introductory article, stay tuned for the next edition where we talk about the Band Protocol’s native token, protocol economics, dataset token, bonding curve concept, and governance parameters!
About Band Protocol
Band Protocol is a decentralized oracle framework for Web3.0 applications. Band Protocol connects smart contracts with trusted off-chain information, provided through community-curated oracle data providers. Blockchains are enabled to connect to any web API with assured data integrity through dPoS economic incentives through one simple function call. Developers using Band Protocol will be able to easily build and manage off-chain oracles, reputation scores, identity management systems and much more.
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