What is API3 (API3)?
API3 is a decentralized protocol that allows dApps to get access to external data and services without compromising decentralization. At its core, API3 aims to replace third-party oracles with fully decentralized and blockchain-native APIs known as dAPIs. Such dAPIs are operated by the source-level data provider on the native chain, so users always know where the data come from and can avoid the problems of single point of failure caused by cross-chain bridges. API3 considers this a crucial step in enhancing the security and reliability of decentralized systems.
How API3 (API3) Works
API3 fetches off-chain data for dApps in a secure manner with dAPIs, a safety net called collateralized service coverage, and a DAO.
dAPIs
In decentralized systems, oracles often act as the bridge between on-chain smart contracts and off-chain data. However, relying on third-party oracles has significant risks because they use middlemen, raise costs of operation, lack transparency, and introduce more opportunities for bad actors. API3 addresses this by offering dAPIs, which are decentralized and blockchain-native APIs. Instead of going through middlemen or complicated processes, dAPIs act as a direct link. They fetch data from the regular internet, the same way you check the weather on your phone or look up the latest news. It's a straightforward and efficient process - no extra steps, no unnecessary complications.
Collateralized Service Coverage
Collateralized Service Coverage by API3 is like an insurance policy but tailor-made for your dApps. API3 sets up a pool of funds which act as collateral, ensuring that if anything unexpected happens, you're protected. If your dApp suffers due to a malfunction in the dAPI and you can prove it, API3 has your back. They've got a predetermined amount ready from the pools to cover those damages. This way, you're not left in the lurch when something goes wrong.
The Collateralized Service Coverage is a collaborative effort between API3 and Kleros, a dispute resolution protocol. Together, they build an on-chain insurance-like service coverage product. This collaboration allows for trustless insurance-like coverage, ensuring transparency and fairness for users of API3.
In the event of a malfunction caused by dAPI, users can make on-chain service coverage claims. The API3 DAO can either pay the claimed amount, propose a settlement, or escalate the claim to the Kleros court for resolution.
DAO Governance
The API3 DAO plays a pivotal role in governing the API3 ecosystem. DAO members, who hold the native API3 tokens, actively participate in decision-making processes related to service coverage, risk assessment, and overall project development. Through decentralized decision making of the DAO, API3 addresses the problems arising from centralized governance and oracles.
The DAO is like the big boss overseeing everything. To keep things simple and cost-effective, when a task becomes too big for one team, it's assigned to a subDAO - a smaller group with specific expertise. This team-based approach is efficient and ensures that the right people handle the right tasks. For critical tasks like managing dAPIs, a subDAO can act swiftly based on their expertise. As API3 grows, more layers of subDAOs may be added, so the operation of each subDAO and of the protocol as a whole can be handled effectively.
The DAO operates on two key principles:
● First, the "principle of least privilege" ensures that teams have the minimum authority needed. To prevent any team from causing major havoc, each team's authority is carefully restricted. It's like giving them just enough power to get the job done without risking misuse. Additionally, teams receive funds based on milestones and deliverables, ensuring they have what they need without excess.
● Second, transparency is crucial. Teams provide detailed reports to the DAO, promoting accountability and allowing everyone to see how API3 operates.
API3 Goes Live on Bitget
Security, robustness, cost efficiency, and flexibility are the cornerstones of API3's design. The elimination of third-party oracles, collateralized service coverage, and a DAO-driven governance model position API3 as a secure, transparent, and cost-effective solution for the next generation of decentralized applications.
