DAOrayaki Reserach |API3 DAOv1：Decentralized APIs for Web 3.0

DAOrayaki

9 min readAug 3, 2021

DAOrayaki DAO Research Grant:

Fund Address: 0xCd7da526f5C943126fa9E6f63b7774fA89E88d71

Voting Result：DAO Committee Yes

Grant Amount：200 USD

Category: Decentralized，cryptocurrency ，dApps

Contributor：Julie，DAOctor @Daorayaki

Chinese Version:https://daorayaki.org/api3-daov1-decentralized-apis-for-web-3-0/

Financing:

current price：$2.91USD.（2021.7.22）

total volume:100,000,000 API3

Market Cap：$123,004,472

Trading Volume：$14,221,795

Token name:API3

Token type：ERC-20

1、Project Summary

With decentralized applications beginning to provide meaningful services in areas such as decentralized fifinance, there is an increasing need for these applications to receive data or trigger events using traditional Web APIs. However,the generic oracle solutions fail to appropriately address the API connectivity problem due to an over-generalized and misguided approach. To remedy this issue, API3 will drive a collaborative effffort to create a new generation of blockchain-native, decentralized APIs, or dAPIs for short.

dAPIs are composed of fifirst-party oracles operated by API providers, and thus are more secure and cost-effiffifficient than alternative solutions that employ middlemen. At the core of the governance, security, and value capture mechanics of this initiative will be the API3 token. Staking the token will grant its holders full governing rights over the API3 DAO along with all the associated rewards. Staked API3 tokens will be used as collateral for the on-chain insurance service that will provide quantififiable and trustless security guarantees to dAPI users. These mechanics will remove the need for a central authority at the ecosystem level.

As a result, the API3 Project will allow smart contract platforms to leverage APIs for the building of meaningful applications in a truly decentralized and trust-minimized way.

2、Team members

l Heikki Vanttinen — — Founder

He has written extensively about the project and what it hopes to achieve. He previously worked as founder and CEO at CLC Group, a blockchain lab “developing real-world connected smart contract solutions for a more trustless, efficient and secure future.” Vanttinen also served as chief marketing officer at Zippie, a mobile operating system that aims to help blockchain technology achieve mainstream adoption.

l Burak Benligiray — — Founder

He worked at CLC Group, serving as CTO. Benligiray has previously written posts highlighting the merits of ChainAPI, which serves as the integration platform for API3.

l Saša Milić — — co-founder

As well as serving as a sessional lecturer at the University of Toronto, where she taught core curriculum courses to computer science students, she’s also worked as a software engineer for Facebook, and as a simulation data scientist for Gauntlet.

3、Governance and Incentive mechanisms

1. Airnode

Airnode features：

Airnode is a fully-serverless oracle node that is designed specifically for API providers to operate their own oracles. It addresses the oracle node-related problems：

1）It does not require any specific know-how to operate. In fact, it is difficult to even speak of an operation, as Airnode is designed to be completely set and forget.

2）It does not require any day-to-day maintenance such as updating the operating system or monitoring the node for uptime owing to existing fully managed serverless technology. It is designed to be stateless, which makes it extremely resilient against any problem that can cause permanent downtime and require node operator intervention.

3）It is built on services priced on-demand, meaning that the node operator is charged only as much as their node is used. This allows any API provider to run an oracle for free and start paying only after they start generating revenue.

4）It does not require the node operator to handle cryptocurrency at all. Its protocol is designed in a way that the requester covers all gas costs.

Airnode protocol：

Airnode protocol is designed to follow the self-emergent patterns used by APIs to achieve as transparent and frictionless of an API–smart contract platform interface as possible.

1）request–response pattern

where the user makes a request with parameters and the API responds as soon as possible. This will be the first pattern that Airnode will support, as it is easy to standardize and integrate with existing APIs that follow the same pattern. An example use case of this scheme would be requesting the result of a specific match to be delivered, which can be used to resolve the respective prediction market.

2）publish–subscribe pattern

where the user requests the oracle to call back a specific method when parametrized conditions are met.For example, a decentralized exchange may request the oracle to trigger a liquidation event for a user in a leveraged position when ETH price drops below $400.

Either of these patterns can be used to implement the live data feeds that DeFi applications use today, but they can also support a much larger variety of use cases in the form of dAPIs.

2. Decentralizing Governance through Tokenomics

API3 DAO

To decentralize the governance of both dAPIs and the project as a whole, API3 will be governed by a DAO. The governance will be entirely decentralized and open, meaning that all stakeholders will be able to participate in the governance of the project directly.

The DAO will vote on high-level parameters regarding mechanics such as staking incentives and collateralization. Additionally, the DAO will give out grants from the DAO bank and by consequence decide on the general direction of the project. More granular tasks will be conducted through hierarchical team structures for scalable governance.

The expected workflow is for people to form off-chain teams and apply for grants to execute one-time projects or continuous operations that will benefit API3. The team makes the grant application with a multisig that has the team members assigned as users , and the DAO grants the funds to the multisig if the grant proposal is accepted. Furthermore, the DAO may authorize the team multisig to make specific transactions depending on the assigned task, e.g., setting dAPI subscription fees for individual users.

Examples of technical grant subjects can be listed as follows:

l Technical development of Airnode, dAPI contracts, API3 DAO contracts

l Frontend development for API3 (staking, insurance, etc.)

l Development of API3 ecosystem projects

l Integration of new APIs, dAPI users, smart contract platforms

l Statistical and qualitative risk assessment for specific APIs and dAPIs

l Managing dAPIs

l Developer outreach through articles, tutorials, videos

l Technical and security audits

l Setting up bug bounty programs, hackathons, etc.

There is also an abundance of non-technical tasks that will be carried out through grants:

l Business development to find new API providers, dAPI users

l Subscription and insurance pricing for specific dAPI users

l Operational and financial audits

l Payment processing

l UI/UX design

l Marketing

l Legal counsel

dAPI monetization

API subscription fees are commonly paid monthly or annually, as this scheme suits both API providers and their clients.To gain access to a dAPI, the user will pay a recurring subscriptionfee, which may either be fixed or customized for the user based on the specific use case.The payment will be able to be made in any cryptocurrency, which will be received by the DAO in API3 tokens through a liquidity pool-based decentralized exchange.

API provider compensation

API providers will be compensated periodically at fixed rates, which will fit their existing pricing models. This will be done using stablecoins wherever possible, But if some API providers categorically reject handling cryptocurrency as payment. In such cases, the DAO will provide a grant that will be paid out in return of the proof that the API provider is compensated in fiat by the grantee.

API3 tokenomics

Decentralized governance requires well-balanced incentive mechanisms that accu?rately model both positive and negative outcomes. In other words, the governing entities should be rewarded for good results and penalized for bad ones.

The API3 token is designed to facilitate this through three main utilities:

1）Staking:

Grants dAPI revenue and inflationary rewards.

2）Collateral:

Backs insurance services that protect users from damages caused by dAPI malfunctions.

3）Governance:

Grants direct representation in the API3 DAO.

The staking utility provides a financial incentive for participating in API3 and con?tributing to increase its revenue. The collateral utility has the participants share API3’s operational risk and incentivizes them to minimize it. Finally, the governance utility gives the participants the ultimate instrument to enact these incentives.

Staking and insurance collateralization utilities of the API3 token results in balanced governance incentives.

(a) Loading the dAPIs with more users increases the likelihood of paying out insurance claims, which produces negative feedback and balances the system.

(b) Due to the balanced nature of the system, the dAPI load does not increase indefinitely, yet settles at a level that the DAO estimates as being below the maximum load the dAPIs can support.

Governance

The only way to gain representation at the API3 DAO will be to stake API3 tokens in the insurance collateral pool. As such, the governing parties will be exposed to all risks and rewards of API3, and will govern to optimize them.

Inflationary rewards and the staked governance tokens being used as collateral will create a positive feedback loop in terms of governance quality. Initial token holders will have to stake and expose themselves to risk if they do not want to lose value to inflation. If they misgovern and lose collateral through insurance claims, these tokens will get returned to the open market, from where they will be acquired by new governing parties. In contrast, if initial token holders govern well and cause token scarcity in the market, the representation distribution will be protected.

API3 Token

Token Allocations

2.Token Vesting

l Founders: Vest over 3 years* with a 6-month cliff.

l Partners & Contributors: Vest over 3 years* with a 6-month cliff.

l Seed Investors: Vest over 2 years.

l Prior Investors: Vest over 2 years.

l Public: Unlocked.

l Ecosystem fund: Supply subject to distribution by the DAO.

3.Quantififiable Security through Insurance

API3 will provide dAPI users with a quantifiable level of security in the form of an on-chain insurance service.

This accomplishes two goals:

(1) the insurance acts as a well-defined and trustless safety net for the user in case of a dAPI malfunction,

(2) it holds the governing parties responsible for dAPI malfunctions, and thus incentivizes them to govern towards more secure dAPIs.

dAPI Insurance

API3 will co-develop an on-chain insurance service with Kleros that provides quan?tifiable and trustless security guarantees to dAPI users.

The proposed insurance service is special in the way that it is collateralized by the funds staked by the governing parties of the API3 DAO. Therefore, it not only provides security guarantees to the dAPI user, but also creates a very strong incentive for dAPIs to be governed in a way that their security is maximized, which will further decrease insurance costs.

4、Contact Information

Official website — https://api3.org/

Twitter — https://twitter.com/API3DAO

Telegram — https://t.me/API3DAO (Community Chat)

Keybase — https://keybase.io/team/api3 (Developer Chat)

Github — https://github.com/api3dao

Reddit — https://www.reddit.com/r/API3/

Medium — https://medium.com/api3

DAOtalk — https://daotalk.org/c/daos/api3-dao/37

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