Why don’t you know about API3?
TL;DR — API3 isn’t your standard oracle.
API3 aims to bring the breadth of data available on Web2 into the blockchain by cutting out middlemen between API providers and Web3 developers.
API3’s unique first-party oracles will enable Web3’s own API Economy, sparking new opportunities for dApp developers and API providers alike.
The Web3 API Economy problem (is an oracle problem)
With close to 25,000 APIs listed on ProgrammableWeb the Web2 API economy is booming, but to enable that type of API economy on-chain will require incentivizing the onboarding of API providers to the Web3 movement.
Unfortunately, the standard method of accessing non-blockchain data by smart contracts is through the use of 3rd-party oracles, who’s architecture removes much of the profit incentive for Web2 API providers.
Not only must they set up and maintain a validator node, which is expensive due to the necessity of a dedicated technical team for operations and updates, but also implement new accounting practices for the digital assets they must collect for their services.
3rd-party oracle infrastructure requires an API provider to expand the scope of their business if they want to serve Web3 directly.
Because of this, API providers usually outsource this work to 3rd party oracle providers, but by outsourcing API providers give up a lot of the value. The oracle node usually captures most of it, only adding to the cost of the middleman tax (described in depth in this article).
For many entities these barriers outweigh the rewards, limiting the real-world data that’s accessible to smart contracts. (Study of API provider interviews)
A sustainable Web3 API Economy
API3 brings API Providers into the Web3 economy by solving the API Connectivity Problem rather than the Oracle Problem.
Where the Oracle Problem is a 3 body problem of data source, oracle, and on-chain data consumer, the API Connectivity problem connects the data source to the on-chain consumer directly — the data source and oracle are one and the same.
With this direct connection, API providers are able to incorporate Web3 into their existing business model, while data consumers (Web3 developers) gain access to source-transparent, high quality, institutional grade data.
We cover the differences between, and benefits of first-party over third-party oracles in detail in this article.
Final thoughts
APIs are natural decentralizers, taking decisions on how a technology is used out to the edges where innovation is happening.
With a growing number of data providers in the API3 alliance, free access to QRNG, and the new API3 Market — the Web3 API economy is off to a good start.
Additional Reading on API3
Understanding Airnode, the direct connection from API to Web3 (Series)
What is QRNG and why is it good for Web3?
Getting APIs on the Blockchain (Series)
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