Ahoy there! Amigo! You’ve been hit by a smooth oracle.

We brought you API3 a few months ago and introduced you to what we think has been the most progressive innovation in the oracle ecosystem so far. Nonetheless, let’s refresh your memory a little bit with what API3 is all about and some of the important concepts:

API3 is a first-party oracle built with transparency and verifiability in mind. It sources data directly from data providers without fee-hungry middlemen or intermediaries.

For perspective, oracles are basically data carriers connecting the off-chain world to the on-chain one. Blockchain applications need oracles to provide real-time data, which could range from price data to any other useful information needed for protocols to serve their users. However, the mainstay type of oracle has been third-party oracles, and it is within this that the problem lies.

Using third-party oracles to transfer off-chain data to the blockchain is often unnecessary. They come with many risks and tend to be quite expensive. An exhaustive foray into the downsides of third-party Oracle providers can be found in our previous article.

A first-party oracle approach exists because blockchain applications need to reinvent how they access off-chain data without the risks, complexities, and expense of a third-party oracle. First-party oracles are the exact opposite of third-party oracles, allowing data providers to transfer data on-chain directly rather than depending on a middleman like third-party oracle providers.

First-party oracle provider, decentralized, easy access to API plugins; who is building this?

The above serves as a precursor to why API3 exists as a collaborative project to make API access and provision more decentralized and less dependent on third parties. It also does side missions such as creating an avenue for easy access to plugins by protocols and even recovering lost funds for lending protocols, as well as offering a public utility product.

How?

• Airnode: These nodes let API providers directly share their sourced data on the blockchain without intermediaries. They are user-friendly and require minimal technical knowledge.
• Decentralized APIs (dAPIs): These are on-chain data feeds aggregated from multiple off-chain first-party oracles operated by the API providers themselves.
• API3 Market: To facilitate developers' and protocols' access to and integration with APIs, API3 created a permissionless, developer-friendly marketplace for users (protocols) to find dAPIs or data feeds, integrate, subscribe to and upgrade these data feeds in just a few clicks.
• Public Good (The API3 Quantum Randomization) QRNG: This is a public service provided by the API3 DAO. It offers on-chain randomization using the Australian National University's Airnode and delivers QRNG as a first-party service.
• The API3 DAO: The DAO oversees governance and further decentralizes the API3 ecosystem with the API3 token. It operates through a structured hierarchy of teams and subDAOs.
• The OEV Network: OEV stands for Oracle Extractable Value, referring to the potential value from Oracle updates or their absence. The OEV network, built as a Layer-2, aggregates OEV from all dApps using API3 data feeds across network chains and allows any dApp using API3 data feeds to recapture the value mentioned above. It reimagines the MEV flywheel by auctioning the rights to execute specific data feed updates for particular dApps, primarily lending protocols, to the highest bidder, with the auction proceeds being programmatically returned to the protocol.

API3 utilizes these components to provide an oracle ecosystem that symbiotically benefits the DAO and the users (protocols). In addition to the above components,  API3 has also released the OEV Watchtower, a tool that helps protocols calculate OEV leakage to showcase how much the OEV Network can recapture.

The OEV Watchtower tool is available to the public. One way users can interact with the tool is to calculate the OEV on their favorite protocol where they provide lending services and proceed to create a proposal to the protocol’s DAO to consider deployment on the OEV Network once it is live. Once live, the proposal will save revenue, which can be redirected to meaningful ventures such as increasing incentives to attract more users and yield.

‍

API3 Protocol Updates

A few new additions have been made to the API3 ecosystem. They have taken strides to attract the use of the API3 Oracle across several network chains, so much so that it’s being dubbed the “Oracle for L2s.”

API3 has rapidly expanded to support Layer-2 blockchains such as SEI Network, BOB, Metis, Light Link, Kroma, Merlin, and X Layer.

These developments have primarily been spearheaded by the launch of the new API3 Market, which allows chains and developers to configure data feeds automatically. In addition, API3 has also secured 4 million dollars in a new funding round led by DWF labs with notable participants such as The Spartan Group, Laser Digital (Nomura), and Caladan. Due to this, 1,423,500 API3 tokens were allocated at 2.81 USDC per token, and the funds will be utilized to support the newly launched OEV Network as well as Dapp integration and marketing.

Beyond network-chain integrations, API3 is ramping up on business development nonetheless, securing partnerships with protocols such as:

• Hana Finance, a decentralized non-custodial liquidity market on Taiko to provide oracles services.
• Developing its oracle stack for opBNB builders with over 180+ data feeds
• Integration with Shoebill Finance on the Kroma network
• Spreading its tentacles to the Bitcoin ecosystem with the Bsquared network, a Bitcoin Layer-2 network.

API3 continues to advance its first-party Oracle services by integrating Airnodes with protocols supplying data feeds directly from the API providers themselves.

Thoughts

With the OEV Network launch just around the corner, there's a lot of excitement about API3 and its unique first-party approach to Oracle services. This could also lead to the repricing of the API3 token, showing its true value as API3 utility expands even more in the broader DeFi ecosystem.

On the usage side, one great thing about subscribing to API3 services is that it frees developers to focus on their actual projects without worrying about the headaches that come with third-party oracle providers. The API3 system cuts down on the need for extensive business development. In less than 100 days, API3 has seen tenfold growth. This rapid success is thanks to their developer-first mindset and first-party Oracle architecture, which guides the ecosystem.

API3 offers leading oracle services, has shown rapid growth and adoption, and has excellent BD relations with the rapidly growing Layer-2 landscape. What more could we ask for? We certainly believe that API3 is one to keep an eye on; with new funding added to the DAO’s war chest, the expectation is a lot of fireworks from this one in no time.