Monolith Spotlights: The Graph, Web3’s data search engine and query layer
The creation of the Internet changed the way the world exchanges information forever. Although Web2 has provided a network from which anyone can source information and communicate with the rest of the world, today much of the Web2 network is controlled by a small number of powerful “Big Tech” entities. This is one of the compelling reasons for the future of what’s known as Web3, a new decentralised world running on top of the Internet. In its current form, Web3 comes with a number of trade-offs. Unlike in Web2, where information can be extracted with a few clicks, searching for data in blockchains can be very problematic. This problem is a key focus for The Graph, the query layer and data search engine for Web3.
What is The Graph Protocol?
If Web3 is to reach its full potential, developers need to be able to access data. Many decentralised apps rely on data from on-chain and off-chain and also need a place to store it.
While oracles and decentralised cloud storage help tackle part of this problem, they’re not particularly useful for pulling data from on-chain.
Blockchains like Ethereum are open source and every transaction is recorded on a public ledger. But sorting through the entire history of the blockchain would be time consuming, to put it mildly. Tools like Etherscan are useful for looking up the transaction history of your own personal address, but it wouldn’t be practical to use it to find out the average price of an NFT sold on Rarible or OpenSea.
Many dApps already rely on interoperability and integrations with one another, and the trend will continue as Web3 grows. This is what makes having a reliable data source so crucial.
The Graph Protocol acts as a data index for the blockchain. But unlike the comparable centralised services that dominate Web2, it’s a piece of decentralised code running on Ethereum.
The GRT Token
This network relies on incentives to run efficiently.
Consumers of the network can use the Query Market to find data, but they must pay a fee to the Indexers.
As an incentive for running nodes, Indexers can earn ETH or DAI. Indexers set the fee for themselves. They’re also paid rewards in the form of GRT, Graph Protocol’s native token.
Delegators stake GRT. This helps ensure that Indexers charge a reasonable fee, and it highlights which should be used to collect data from. In exchange for this, Delegators earn a percentage of the query fees. They can also claim indexing rewards.
Indexers must also stake GRT. If they don’t provide the high-quality data as they are meant to, they run the risk of getting slashed, meaning that they lose some of the staked tokens.
As Curators are responsible for signalling the high-quality data to Indexers, they are also required to stake GRT. They are incentivised to stake tokens on Subgraphs with high-quality data. Curators help secure the network, so if they decide to take out their GRT, they’re charged with a withdrawal fee.
The biggest contributors to the network are also eligible to earn from the rebate pool paid in GRT.
When Indexers receive a query fee, a supply of GRT gets burned. It’s also burned for any withdrawal fees. This means that over time, GRT could become a deflationary asset, depending on the usage of the Graph Network.
Recent developments and the road ahead
The Graph Network launched on mainnet in December 2020. Since then, its major updates include expanding to NEAR, welcoming thousands of Indexers, Curators, and Delegators, and hitting over 1.8 billion daily queries. It now has over 2.6 billion GRT staked on Indexers and over 3 million GRT signalled across 200 subgraphs, making it one of the world’s most used protocols.
In 2021, the project commenced its migration from a hosted service to a decentralised network. Audius, mStable, Opyn, and UMA were among the first subgraphs to migrate to the network.
It also launched two new products called the Graph Explorer and Subgraph Studio, allowing anyone to permissionlessly deploy and curate their own subgraphs.
Next, the core developer teams working on the project will focus on new features that make it easier to build subgraphs and query data, and improve performance. It also has plans for Layer 2 and other blockchain integrations such as Cosmos, Solana, and Polkadot.
The project’s ultimate mission is to become a fully decentralized protocol. Eventually, governance will be fully handed over to the Graph Protocol community, including GRT holders. With that, the protocol will more closely resemble a DAO.
Conclusion
The Graph Protocol provides one of the missing pieces to the Web3 jigsaw puzzle. By acting as the query layer for decentralised applications, the protocol helps provide data and facilitate the integrations that many apps require to work to their best. For Web3 to usher in the next generation of the Internet, Graph Protocol could be one of the most vital pieces of infrastructure on the blockchain.
