Where to Buy API3 (API3) Crypto: Complete Beginner’s Guide 2022

Decentralized Autonomous Organizations DAOs provide hands-off governance for blockchain projects. One of the more recent projects disrupting this space is API3. The project aims to tackle the ‘Oracle problem’ acting as a solution to connect APIs from data providers.

Building the decentralized API network (dAPI) drew plenty of attention during the project development. Crypto enthusiasts dub it ‘The Chainlink Killer’ but is it?

This review looks at the API3 project in detail and how to buy the native API3 token. Does it offer value to the ecosystem? We’ll discuss how it works and how it solves these Oracle problems.

What is API3?

To grasp the concept of the API3 project, we must understand how it works. API stands for ‘Application Programming Interface.’ It’s a well-documented protocol enabling the transfer of services and data. APIs are commonplace in the app development community, with most programmers being familiar with the technology.

An example of a functional API is the protocol designed to provide pricing data to cryptocurrency exchanges and aggregators, such as Coinmarketcap.com. The API has many useful applications, and it can monetize data in scenarios where data providers allow access to that data by developers for a fee.

This structure allows developers to build apps efficiently without creating everything themselves. We could think of APIs as a set of Lego blocks. Developers choose what they require from the API and connect it to their applications. The reality is that many apps would fail to launch or function without API.

This concept sounds like a dream for developers. However, the evolution of the space to dApps and Web 3.0 presents a few problems. The issue is that API infrastructure isn’t compatible with this new technology.

This stage is where API3 promises to make it possible for older API data providers and users to connect data sources to smart contracts. This functionality is possible without connecting to third-party intermediaries. API3 accomplishes this through the decentralized API network.

What Is the Value in dAPI?

Oracle technology was supposed to act as the data provider to smart contracts before the creation of API3. One of the leading technologies in this space is the Chainlink project. Chainlink has a node sitting between its API provider and smart contract.

The issue with this infrastructure is it adds a new intermediary, completing the function of removing the third-party solution in the process. The problem with the design is Oracle networks are typically rent-seeking. This issue means the cost of the process continues to rise.

Since the Chainlink project is a dominant oracle network, it’s gaining a sole monopoly over all related data feeds. Unfortunately, this process creates a type of centralization. There’s also no means to govern data provided to Oracles.

Unfortunately, the nodes are neglected and chastised for providing incorrect or corrupt data. However, there are no penalties enforced on the provider.

What Is the Chainlink?

Chainlink distributes requests across data sources and oracles. API3 thinks the solution to the issue is allowing API providers to operate their nodes themselves. This model institutes competition, lowering the inflationary mechanism in the system while promoting decentralization. This structure gives the influence to govern the data provider.

The huge growth of the DeFi economy means it’s critical for apps to source reliable and trustworthy data. It also ensures the process is completely transparent. With the API3 system, oracles will own the services provided and the data turning them into ‘first-party’ Oracles.

This design increases decentralization and allows transparent curation of the data feed, which is critical in all DeFi applications.

The Oracle Problem

The Oracle problem is one of the central issues facing the implementation of smart contracts. The problem becomes apparent when on-chain smart contracts have enforceable rules and functions. However, this goes out the window when you realize it’s only useful for data already on the Ethereum network.

Unfortunately, there’s no way to build a smart contract around asset prices like stocks or precious metals when the data source is off-chain. This issue is the core of the Oracle problem. The challenge is to place this data on-chain and execute it in a trustless, decentralized manner.

In addition, there must be protocols in place to verify the data and its source. When we rely on Oracles, we increase the vulnerable attack vectors in the smart contract and the Oracle provider. Blockchain engineers have looked for a solution to this issue since the development of smart contracts.

Some solutions, like Gnosis and Augur, implement the approach of prediction markets. However, the preferred strategy is an Oracle provider delivering data cost-effectively and anonymously without third-party interventions. This design formed the basis for the development of Chainlink.

Chainlink On-chain Oracles

If we consider the state of these Oracle-based solutions, Chainlink takes center stage. It’s the preferred Oracle solution, making huge strides in the blockchain development community in recent years. The LINK project has a robust community, with the LINK token positioned as a blue-chip token with plenty of utility.

However, it’s important to note that while LINK does solve many issues, it does have problems. That’s where API3 steps in to provide the best solution. API3 presents the best solution to the Oracle problem, making it indispensable to devs.

The API Problem

So, the Oracle problem is merely a simple oversight in smart contract development on the ETH network. Oracle development neglected to consider node decentralization when collecting and distributing Oracle data.

The reality is the issues Oracles solve aren’t as challenging and complex as you might assume. Essentially, what the Oracles are attempting to solve using a complex method, pulling off-chain data to on-chain contracts.

In this respect, Oracles compare with APIs in mobile and web applications. They achieve this since the solutions are required to deliver data to end users.

The API3 Solution

Let’s look at how API3 resolves these issues. We know there are several issues with delivering accurate and secure data on-chain to smart contracts. Can API3 solve the problems effectively compared to the current Oracle solutions?

Essentially, API3 takes the value passed on to the nodes in Chainlink, delivering it to the data providers. As a result, the process removes the middleware, optimizing it. Instead of placing nodes between data providers and smart contracts, API3 simply turns the data providers into nodes.

This strategy removes unneeded, additional, and redundant layers, solving several problems that Chainlink is working on. It also presents a viable solution to Chainlink’s scaling issues as the protocol grows.

API3 Token Use Cases

The API3 technology intends to use its decentralized autonomous organization (DAO) for governance protocols. This strategy means participants in the Chainlink ecosystem have a say in network security and development.

The API3 ecosystem relies on the API3 token for the following functions.

Collateral – The API3 staking pool acts as collateral for on-chain insurance.Staking – API3 holders stake API3 to participate in on-chain governance and earn rewards.Governance – The API3 token provides a direct incentive for governance, like voting. Users that stake API3 receive a portion of the dAPI revenue. Their staked API3 tokens provide collateral for on-chain insurance.Disputes – dApps can open disputes and raise insurance claims in the case of lost revenue due to downtime, malfunction, or incorrect data. The dev team intends to use this functionality to resolve insurance claims.Payments – The dev team intends to charge a subscription fee for those dApps utilizing the dAPI network. Data providers will receive rewards in API3 tokens.

API3 Governance

Decentralized governance is a requirement for most blockchain projects in the modern era of web 3.0. API3 plans to cover this issue by incorporating a DAO governance protocol.

This structure adds value to the tokens beyond a simple monetary specification. It means holders of API3 tokens and those staking them get a say in the governance of the blockchain and the execution of any changes that occur.

Those users holding or staking API3 tokens decide on updates to governance changes, such as the fee structure. This structure allows no single point of failure in the direction and governance of the project’s development and operations.

Considering that API3 will operate as a data marketplace, this functionality will be incredibly powerful, making for a bullish sentiment on the API3 project and its future.

The API3 DAO

The governance of the API3 protocol includes a staking mechanism. Staking allows for governance and voting. However, it also provides an incentive for users to stake their API3 tokens as insurance against malfunctions or data errors in the system.

While it might be somewhat naïve to assume these issues won’t occur, the model insinuates that these occurrences are minimal. We’ve seen similar data errors occur on other API platforms. So, it’s good to see that API3 acknowledges a solution for altering the possibility of this occurring.

The deflationary effect is another benefit API3 offers to users that choose to stake their tokens. This structure allows the community to maintain a stable market price, reducing volatility in the API3 price action in the market.

The API3 Token

In November 2020, API3 conducted its private funding round, raising $3 million for the project. A public sale of API3 tokens in December 2020 was a success, giving the ecosystem the funding it needs to develop and execute the protocol and network.

The public sale raised a staggering $23 million for the project, showing the interest in the utility API3 offers the dApp community. The API3 tokens went on sale using a bonding curve, beginning at $0.30 and eventually reaching $2.00.

The project experienced widespread adoption in the dApp market, experiencing a 1,300% increase in price during the mania of 2021. Despite losing much of that value in the crypto winter of 2022, it remains a viable project.

API3 tokens have a total circulating supply of 100,000,000 API3 tokens. The team sold 30 million API3 tokens in both sales, with ten million going to the private sale and twenty million going to the public sale.

It’s important to note the public tokens are unlocked, but the tokens sold in the private sale are subject to a vesting schedule of two or three years for the lock-up period. Early investors in the project stake their API3 tokens to receive incentive rewards for supporting the API3 ecosystem.

API3 Token Allocation

The API3 tokens started trading on exchanges on December 1, 2020. The initial price was set at $1.30, and it steadily rose in value as the hours passed. Within a week, the API3 token was trading at $2 each, producing a 30%+ return in just 14 days.

While there was a dip under $2 by the end of 2020, the 2021 mania saw the price moon to $964 before experiencing a slow decline to a less volatile price, holding a range between $1.05 to $2.00 in H2 2022.

How to Buy API3 on eToro

This broker offers low fees, high liquidity, a wide range of crypto offerings, top-notch security, and in-built wallet functionality. To get started seamlessly, follow these detailed steps:

eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.

1. Sign Up

Visit eToro and click on the ‘Start Investing’ visible in the middle of the home page. This will redirect the investor to a registration page where they must enter a username, email address, and a strong password.

They can skip this process and sign up by connecting to a Google or Facebook account.

2. Verify ID

 

As a regulated broker, eToro requires that investors complete a know-your-customer (KYC) process on eToro. This process enables them to unlock this broker’s full trading features and functionalities. To get started, click on the newly created profile icon and proceed to select the ‘Verification’ icon. Once done, upload a valid ID card. This could be in the form of a driver’s license or any government-issued identity card.

Investors will also be asked to submit a recent utility bill or bank statement to validate their addresses.

3. Deposit Funds

Once the verification process is complete, investors can proceed to initiate a deposit on their newly created eToro account. Click on the action tab, select ‘Deposit Funds’, choose a payment channel, and input the investment amount.

Investors in the UK and US can invest with a minimum deposit of $10 with cards and a minimum deposit of $500 for bank transfers. Once done, tap on the ‘Deposit’ icon to place an order.

API3 Wallets

Software Wallet

Hot wallets, also called software wallets, are one of the most popular cryptocurrency storage options. They are always online, hence the affiliation with the ‘hot’ tag. Investors can easily get a hot wallet once they open an account with a crypto exchange. This allows them to store and manage their private keys, which prove their ownership of their assets to the blockchain network. Hot wallets are usually more convenient for everyday crypto transactions and can be custodial or non-custodial.

A custody wallet is responsible for storing assets to an exchange or a third-party platform. The user only places an order for a transfer or receipt, and the exchange signs off on the transaction, much like the traditional banking system. Meanwhile, a non-custodial or self-custody wallet gives the full responsibility to the end-user.

Hot wallets are usually free, but they are largely considered less secure due to their constant internet connectivity. An instance of a hot wallet is the Binance Wallet.

Hardware Wallet

A Hardware wallet is a device which has been created to provide an extra layer of security when interacting with your various cryptocurrency wallets.

Normally you would use your private key to move funds, the problem is though, if your computer has been compromised with malware or a virus, it is possible for your private keys to be captured and used to steal your funds.

With a hardware wallet, the private keys are stored on the device and never exposed to your computer, which means even if you are infected with such a program your private keys will remain safe. These options are safest way to store your crypto if you have more than a small amount.

Popular examples of cold storage offerings are the Ledger and Trezor line of hardware wallet solutions, read our reviews:

Mobile wallet

A mobile wallet is essentially a hot wallet on a smartphone device. They offer users an even more convenient way to use their coins for daily activities. Mobile wallets store and manage users’ private keys while enabling them to pay for things they love with their digital assets.

These wallets are usually free and always online for transactions to be processed. Popular mobile wallets are eToro Money Wallet and Coinbase Wallet.

Desktop wallet

A desktop wallet is a PC version of a hot wallet. It is essentially software that an investor downloads into their personal computer or laptop for easy interaction with their digital coins. They also offer a browser extension which allows users to interact using an extension instead of downloading the entire software. Desktop wallets are also hack-prone due to their online nature. A popular example is the Exodus Wallet.

Paper Wallet

The paper wallet is arguably the oldest form of crypto wallet. They are no longer common in the modern crypto industry. It contains users’ public and private keys. The paper wallet is the least secure type of wallet as it can easily be lost, stolen, or torched.

API3 – Conclusion

Undoubtedly, API3 presents tremendous value to the DeFi space as blockchain adoption grows.

Devs can create complex, novel use cases, and those dApps created using the tech require better means of interfacing with third-party data providers.

While existing oracle solutions are somewhat functional, several design compromises lead to severe problems as solutions scale. As a result, we could experience compromised data sets and an increase in costs that make the ecosystem exclusionary.In the case of data corruption and compromise impact could be massive. The highly automated design of dApps and smart contracts will experience any data corruption spread throughout the network. The API3 solution enables API providers to operate Airnode oracles, giving interoperability with all third-party providers in a decentralized process.It ensures the API providers have the required incentive to produce high-quality, trusted data. When we consider the potential for significant returns offered to node operators in oracle systems, API providers will likely capitalize on the ability to provide services and data via the easy-to-implement Airnodes.

Unless we see something superior, it appears API3 brings a powerful solution to the Oracle problem by connecting conventional API services and decentralized blockchain tech. While it’s too early to assume API3 is the solution to the Oracle problem, it certainly looks promising.