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API3’s architecture upgrade is the future of decentralized oracle networks

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CoinFund’s investment thesis for API3

Austin Barack

Investment Thesis

  • For smart contracts to unleash programmable money onto the world, they need to access the world’s data as their inputs
  • Oracles, the technology that is responsible for delivering data to smart contracts, is among the most critical components of blockchain infrastructure and successful oracle networks will accrue significant value
  • Oracle solutions to-date have relied on third-party intermediaries which is suboptimal from a cost, efficiency, security, and stakeholder inclusiveness perspective
  • By virtue of a novel architecture that increases trustlessness, decentralization, stakeholder coordination, and which lowers integration and delivery costs, API3 is likely to convert a very large market of data providers as global adoption of smart contracts and decentralized applications proceeds

One of the most transformative advances in blockchain was the implementation of Ethereum and smart contracts. Smart contracts allow money, capital, and assets to behave in a programmable manner that is simultaneously decentralized and censorship-resistant. This innovation has demonstrated serious growth. Just in the past year Decentralized Finance (DeFi) applications have grown from ~$650MM in assets put to work for borrowing, lending, and trading as of the start of 2020 to over $22.5B as of January 15th, 2021, growth of over 3300% in one year. Decentralized exchanges (DEXes) processed $25.1B in trading volume just in December 2020, with double digit monthly growth rates expected going forward. Overall, the use cases for decentralized applications are endless and represent fundamental disruption to the broad fields of finance, digital services, and marketplaces.

For smart contracts to unleash programmable money onto the world, however, they need to access the world’s data as their inputs. Almost all of this data exists “off-chain”, outside of blockchains, and is stored in centralized databases. To solve this problem, the technology known as oracles deliver the data applications need and inform their execution. Moreover, oracles need to be trustless (do not require trust), or they can manipulate the smart contracts by falsifying data, which is known as The Oracle Problem. API3 is improving upon prior architecture and is building a highly performant and commercial oracle network. CoinFund is proud to support the API3 team on their journey to develop the future of oracles.

There are a number of existing oracle networks today that operate across different blockchains. The most notable network is Chainlink, one of the earliest companies working on this problem and today the dominant solution in the market. Other approaches include Band Protocol, Witnet, and DIA. These oracle products work by having third-party intermediaries operate as nodes that connect API data sources with decentralized applications, and historically this architecture was the only practical way to deliver the data to smart contracts. This approach, however, has several notable drawbacks:

  1. No direct monetization for data providers. Providers do not control the delivery of data and are unable to effectively manage the monetization of their valuable data streams.
  2. Big integration costs. It often takes significant development work for a third-party node to connect to an API source, resulting in substantial operational work and cost.
  3. Inefficient delivery. The presence of third-party intermediaries who must variously coordinate to deliver correct data increases the overall cost of delivery of data to the smart contract. Furthermore, since these intermediaries need to coordinate and play consensus games, they become vulnerable to Sybil attacks introducing data security risks.

API3 solves all of these problems by eliminating third-party intermediaries. Instead, API3 provides a simple, drop-in solution called Airnodes to data providers that allows them to connect their data directly to smart contracts. In this way, data providers again become first parties in the path of data delivery. The Airnode solution serves as a trustless on-chain proxy for APIs to interact with any smart contract on any blockchain. Data providers can feed their data to decentralized applications with minimal integration costs. Airnodes are serverless nodes and can be easily integrated using existing technologies without the need for dedicated blockchain development resources. By joining the API3 network, API providers are able to monetize their data without intermediaries. Additionally, consumers of the decentralized APIs (dAPIs) have full transparency into their data source and potential Sybil attack vectors are eliminated.

In addition to the unique architecture of Airnodes, one of the most interesting approaches of API3 to the problem of oracle networks is its structure as a DAO (Decentralized Autonomous Organization). The API3 DAO is a community-governed organization of token holders who drive the inclusion of new data sources, manage the payment of data streams, and provide a novel insurance pool and dispute resolution mechanism to protect data consumers. The API3 DAO works as follows:

API3 token holders can stake their tokens which will grant them voting power in the API3 DAO. The funds staked in the DAO function as an insurance pool designed to compensate smart contract users in the event of an API malfunction. The stakers are compensated for this risk by receiving protocol rewards. By having an insurance pool with token holder assets, the DAO is incentivized to only integrate with high quality data providers and grow at a measured and responsible pace to prevent data issues. This serves to align token holders’ interest in growing activity levels with smart contract consumers’ need for accurate and reliable data. In addition, disputes will be resolved in Kleros Court to maintain decentralization in managing malfunctions. However, more than just the efficiency gains from improved coordination, a DAO provides a structural advantage due to its ability to align stakeholder incentives and achieve broad decentralization.

The API3 team, led by Heikki Vänttinen, Burak Benligiray, Saša Milić, and André Ogle, is one of the most well-positioned teams to solve the problem of oracle networks. They have extremely deep blockchain experience, particularly working in oracle networks. Several of the key members of the API3 team formerly operated the CLC Group, the leading node operator on the Chainlink network. The team also previously built out the Honeycomb marketplace for premium APIs. Outside of their substantial experience and expertise, API3’s DAO structure allows for improved coordination and incentive design benefiting organizational scaling.

Technological advancement follows an arc of innovation and API3 represents the oracle solution on the cutting edge. At a time when blockchain usage is expanding at an incredible pace, API3 is providing a solution to bring onboard the major data providers, working with them as first parties to deliver data, while simultaneously solving for decentralization, security, and cost. Data delivery to smart contracts is one of the most foundational components of the blockchain ecosystem and the networks that do this well will become incredibly demanded and valuable. Today, the first mover network, Chainlink, has a fully diluted market capitalization of $19.8B. By contrast, API3 is currently valued just over $200MM. We expect data usage will continue to grow at an exponential pace as blockchain adoption accelerates. API3’s market leading technology and governance position it to take a dominant role in the future of oracle services and we could not be more happy to support them along the way.

Source: https://blog.coinfund.io/api3s-architecture-upgrade-is-the-future-of-decentralized-oracle-networks-b2f47031a4a6?source=rss—-f5f136d48fc3—4

Blockchain

What Coinbase Going Public Could Do For Crypto

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Messari Values Coinbase At Nearly $30 Billion As The Bitcoin Exchange Prepares To Officially Go Public

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Coinbase, the biggest US-based cryptocurrency exchange has disclosed its detailed plan for the upcoming direct listing on the stock market by Nasqad. Coinbase submitted an S-1 report to the US SEC outlining key information such as revenue and ownership structure for investors to carry out due diligence on the company.

According to the document, Coinbase has 43 million verified users and an average of 2.8 million transactions per month. In 2020, the company returned a net income of $322 million from total revenue of $3.4 billion, with transaction fees constituting 96% of the net revenue.

Coinbase which makes most of its profit from bitcoin and Ethereum transactions, also saw a 56% increment on its $1.1 billion direct revenue for 2020 compared to $482 million in 2019.

The company incurred a total of $880 million in expenses for 2020, most of which went to sales, general administrative expenses, and research and development. Transaction reversal costs miners fees, staking fees, and verification expenses constituted $135 million of the total expenses,

Coinbase also made $533 million in 2019, against $579 million in operational and development costs, leading to losses totaling $46 million.

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Coinbase to Usher Crypto’s Real Mainstream Adoption

The report indicates that much of the revenue for 2020 was generated from institutional investors’ activity in the crypto market but with higher retail activity in Q4 2020 than in previous quarters.

Coinbase’s debut as the first publicly listed crypto-exchange in the US is estimated to be one of 2021’s largest new listings of the tech industry. This will have a huge positive impact on the crypto market investors and blockchain technology backers.

According to the crypto trader and analyst Rekt Capital, the public listing will officially open up cryptocurrencies to the public.

“Coinbase going public is another way of saying crypto is going public.”

Coinbase Becomes Decentralized

The update comes a month after Coinbase chose Nasdaq as its direct listing avenue on February 1, following a secondary Coinbase stock launch by Nasdaq Private Market on January 25.

Now that Coinbase has moved to a remote-first environment without headquarters in any city, the company is referring to itself as a decentralized company. Up to 95% of Coinbase employees have the option to work at home, in a post-office world setting, or a mix of both.

“since we’ve made the decision to go remote-first we’ve decentralized ourselves; even after people can safely return to offices, the executive team has no plans to be “in-office” on a regular basis,  and none of them currently live in San Francisco.”


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DISCLAIMER Read More

The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.

Source: https://zycrypto.com/what-coinbase-going-public-could-do-for-crypto/

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Blockchain

3 types of bitcoin investors that ‘should be concerning to central banks’

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With 106 million global crypto users as of January 2021 and a crypto population that has now surpassed 100 million, a financial expert noted that central banks must now be wary of certain crypto investors. In a new seminar held by the University of Pennsylvania’s Wharton School, part-time professor, Mohamed El-Erian, who is also Chief Economic Adviser at Allianz said that Central Banks should be careful about three specific groups of Bitcoin investors. 

He explained that while the first group of people is investing for positive reasons, the second is motivated by negative factors to adopt Bitcoin. The positive investors “truly believe Bitcoins will become money ”or “a currency as opposed to a commodity.” 

However, El-Erian cautioned that central bank authorities must keep watch on those “being pushed out of everything else and pushed into Bitcoin”, forming the second group that the expert earlier mentioned. 

They look to Bitcoin in order to protect themselves from government investment options, which some investors believe has been “artificially jacked up.” Interestingly, a recent survey found that people aged over 55 opted for Bitcoin due to a fear of currency devaluation – as central banks have historically printed more money to boost economies. The expert said that such people are forced to invest in the asset because “they don’t know how else to mitigate risk.” 

Do you really want to invest in a government bond whose price has been? So ‘let’s diversify, let’s put 2% into Bitcoins.’

El-Erian further categorized “speculators” as the third type of investors, who face profits and losses albeit “in a single day.” According to him, all three types of investors “should be concerning to central banks.”

When it’s trading above $50,000, all three messages are problematic for central banks. So, we are going to see central banks look increasingly at cryptocurrencies as something they should be involved in, and not just stand on the sidelines.


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Source: https://ambcrypto.com/3-types-of-bitcoin-investors-that-should-be-concerning-to-central-banks

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Blockchain

Exchange listings and NFT boom back Enjin’s (ENJ) 52% rally to a new high

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Non-fungible tokens (NFT) are rapidly becoming a focal point of the cryptocurrency market as evidenced by stories of millions of dollars being raised in minutes for one-of-a-kind tokenized art pieces and rare collectibles that traders rush to get their hands on. 

One project that has been benefiting greatly from the resurgence of NFTs is Enjin Coin (ENJ), which broke out to a new all-time high of $0.67 on Feb. 25 following its listing on the Crypto.com exchange as well as the launch of spot and perpetual futures trading on FTX.

Data from Cointelegraph Markets and TradingView shows that ENJ rose 52% from a low of $0.438 on Feb. 24 to a new high of $0.67 before experiencing a pullback to its current price of $0.611.

ENJ/USDT 4-hour chart. Source: TradingView

A scroll through the project’s Twitter feed details numerous recent partnerships and integrations that have helped fuel Enjin’s price rise.

Minecraft is one of the most notable integrations for the Enjin ecosystem and users are able to earn special NFTs that unlock secret games inside the video game series.

The platform has also benefited from joining forces with the growing ecosystem of the Binance Smart Chain (BSC), which has launched an NFT educational campaign that Enjin will be part of.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for ENJ on Feb. 24, several hours before today’s price rise.

The VORTECS™ score, exclusive to Cointelegraph, is an algorithmic comparison of the historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. ENJ price. Source: Cointelegraph Markets Pro

As seen on the chart above, the VORTECS™ score for ENJ reached a high of 70 on Feb. 24, shortly before the price began to spike to a new all-time high on Feb. 25.

The growing popularity of the NFT space, along with numerous big-name partnerships has Enjin well-positioned as the current bull market cycle progresses into 2021.

Its recent integration with the BSC provides a way to escape high fees on the Ethereum (ETH) network and could bring a new wave of activity to the Enjin ecosystem.

Source: https://cointelegraph.com/news/exchange-listings-and-nft-boom-back-enjin-s-enj-52-rally-to-a-new-high

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