AP13’s primary product is a decentralized application programming interface (dAPI).
An API is a software intermediary that allows apps to communicate. Uses for APIs include extracting data and sharing data. The purpose of API3 is to build and monetize dAPIs at scale.
AP13’s dAPI is a blockchain intermediary that allows dApps to share data on up to 10 networks. This data can be valuable because it includes real-time crypto and forex prices. One use for AP13’s dAPIs is to build a decentralized oracle network.
Connecting Smart Contracts to Data
They claim dAPIs can connect data streams to smart contracts. This is important because smart contracts are the code dApps use to make transactions. For example, a stablecoin’s smart contract makes payment in fiat currency.
Hence, a dAPI could help a smart contract learn real-time prices for the currency it makes payment. For example, a dAPI could tell USDD (USDD) the current dollar price.
API3’s Airnode middleware connects Web APIs to smart contracts. To explain, Web APIs connect software and apps on the internet. Airnode can also connect smart contracts to Web3 APIs.
OEV and MEV
They claim API3 can extract and share two kinds of valuable data: Maximal Extractable (MEV) and Oracle Extractable Value (OEV). MEV is the process of adding as much additional profit to a blockchain block as possible. The most common form of MEV is the fees, blockchain and defi users pay.
OEV is the use of oracles to capture value that normally goes to third parties. For example, fees. In OEV they update the data feed when the user feed hits a certain level. One ofAPI3’s major uses is to extract OEV and return it to dApps.
Users subscribe to the dAPIs with API3 (API3) tokens. Holders can stake API3 tokens in the coverage staking pool to provide liquidity for the API3.
In exchange, they receive weekly staking rewards. The API3 token also serves as the governance token for the API3 DAO (decentralized autonomous organization) which governs API3. Token holders receive shares in the API3 DAO by staking tokens to the coverage pool.
They use coverage staking pool to cover losses from dAPI malfunctions. They claim the coverage staking pool generates annual rewards (APY) of 25.48%. The pool contained 62.228 million API3 on 21 March 2023.
Quantum Random Numbers
API3 (API3) supports several interesting solutions, including: Quantum Random Numbers.
They allege most random number generators do not generate actual random numbers. A lack of randomness creates a potential security hole for smart contracts.
They claim API3 and The Australian National University (ANU) Quantum Optics Group can generate true random numbers based on quantum mechanics for free. Hence, all the smart contract pays for is gas (the right to access to the Ethereum Virtual Machine).
Users for Quantum Random Numbers include nonfungible tokens (NFTs), gaming (keeping games of chance random), tamper-resistant generation that maintains fair odds for gambling, and participatory processes such as random token distribution and prize drawings.
Decentralized Application Programming Interfaces
They claim API3’s dAPIs are on-chain data feeds for API provider-orated oracles with decentralized governance.
API3 dAPI providers operate nodes, which eliminates middlemen and reducing security risks. API3’s architecture holds the API3 DAO accountable for API security.
They claim dAPIs can bridge (connect) to any blockchain. This allows the dAPIs to function as a multilayer, cross-platform data solution. The goal is to create an ecosystem of dAPIs and data integration tools.
What Value could API3 obtain?
I think API3 meets a genuine need for real-time price information. Hence, there could be a market for it.
For example, lenders, decentralized exchanges (DEXs), synthetic asset creators, and stablecoins need real-time price information to function. Yet finding real-time prices can be difficult.
Consequently, Mr. Market has some interest in API3 (API3). For example, API3 was CoinMarketCap’s ninth most trending cryptocurrency on 21 March 2023. Similarly, API3 was CoinMarketCap’s 197thd ranked cryptocurrency with a $1.63 Coin Price on 23 March 2023.
CoinMarketCap gave API3 a $130.824 million Market Capitalization, a $117.074 million Fully Diluted Market Cap, and a $10.163 million 24-Hour Market Volume on 23 March 2023. Similarly, CoinMarketCap gave API3 a $10.202 million Centralized Exchange (CEX) Volume and a $16,262 Decentralized Exchange (DEX) Volume. They base those numbers on a 80.188 million API3 Circulating Supply, and a 71.749 million API3 Total Supply.
I think API3 is an interesting DeFi product that meets an actual need. I believe API3 could achieve actual value because banks or defi protocols could pay for its services.