With the relaunch for BandChain Phase 2 (Laozi) coming up, we will summarize the updates in the Band Protocol architecture, technical specifications, and features introduced in the upgrade. While the whitepaper will be officially released in PDF format closer to the time of Phase 2 Mainnet launch, we wanted to take the opportunity to educate and inform the community.
Band Protocol is building a decentralized oracle network that caters for traditional enterprises to enter the blockchain application industry and Web 3 developers to access trusted, reliable information that is external to on-chain networks. With Phase 2, we unlock a new decentralized data market economy, unrestricted access for institutions to earn revenue from the provisioning of data, support IBC implementation, and Cosmos starport.
This article will begin with a deep dive into Band Protocol decentralized data market economy (Part 1: Scaling the supply side), where Part 2: The demand side will be discussed in the upcoming article.
Creating the First Decentralized Data Market Economy
Imagine a fully decentralized data market. It would consist of requesters (buyers) and data providers (sellers) who interact and exchange freely without any authority or oversight — creating an expanding economy where everyone benefits and attracts more and more players. BandChain Phase 2 is the realization of this vision in the blockchain market space with its bold feature that supports both the supply and demand sides.
Through the introduction of the on-chain revenue feature, data providers can enter the market freely and are compensated as they provide data. Meanwhile, BandChain’s Oracle Script design allows for full customization for developers to connect directly with various reputable data sources. All of this happens in a permissionless format, allowing low-barrier entry for both ends of the market.
Part 1: Scaling the Supply Side through On-Chain Revenue
To create a data market economy, we introduce the streaming revenue feature — the mechanics for data providers to collect fees on-chain in real-time; this allows a cohort of data providers (whom we refer to as “premium data provider”) to collect their earnings in the form of a query fee every time a validator comes to ask for oracle data. With this form of transaction, compensating data providers through manual gateways and processes will become a thing of the past. The on-chain revenue feature, coupled with the existing data source script architecture unlocks new orders of network effects and scalability for Band Protocol.
For a data provider to participate in the market, they need to only fulfill the following requirements:
- Have API and data unit to distribute data
- Have a BandChain wallet to receive query payment in Band Token
- Deploy a data source script that contains instructions for validators to query data from the BandChain Gateway node
- Runs and maintains the Bandchain Gateway node to distribute data to the decentralized BandChain network
Once the data provider configures this setup, they essentially have set up their “data shop” to automatically generate revenues for sales to the DApp market without any interventions of a third party. The data requesters would also be able to easily request data directly from them by sending transactions with query fees. This access to the market makes them a premium data provider.
To understand the data flow with the streaming revenue, please check out a deep-dive here.
This feature will work seamlessly with BandChain’s current infrastructure by design. All existing and newly created oracle scripts can support premium data providers who denominate the query fee while users specify a fee limit of each request to prevent any unexpectedly high fee cost when requesting oracle data. This means that the existing data providers who activate this feature can begin to earn revenue on-chain as Phase 2 is live.
In turn, this will rapidly expand Band Protocol’s target market to blockchain applications that do not have access to bespoke and customized decentralized oracles.
BandChain Phase 2 is set up to not only be the go-to decentralized data market economy but a scaling and automated one that will thrive in the ever-changing landscape of blockchain applications. The On-Chain Payment Protocol underlying the Band Protocol solves the incentive and market entry issues for traditional institutions through a flexible, simple framework to bring significant enhancements to the security, quality, and availability of data on BandChain.
To understand further how BandChain Phase 2 also prepares itself on the data demand side of the data economy market, please continue onto Whitepaper Digest #2 which discusses the IBC integration and its implications.
About Band Protocol
Band Protocol is a cross-chain data oracle platform that aggregates and connects real-world data and APIs to smart contracts. Blockchains are great at immutable storage and deterministic, verifiable computations — however, they cannot securely access data available outside the blockchain networks. Band Protocol enables smart contract applications such as DeFi, prediction markets, and games to be built on-chain without relying on the single point of failure of a centralized oracle. Band Protocol is backed by a strong network of stakeholders including Sequoia Capital, one of the top venture capital firms in the world, and the leading cryptocurrency exchange, Binance.