Crypto Academy Season 3 | Intermediate course by @allbert –week 7: Blockchain Oracle

First I would like to thank the opportunity this homework, linked with the beautifully explained lesson from the professor @allbert, gave me, and everyone else, to learn new knowledge in the blockchain environment!

Said so, I would like to get straight to the homework requirements as requested in the original post:

1 - History and Description. Does it have any token or cryptocurrency associated? Explain.
2 - Functionalities and real-life applications.
3 - Pros and Cons.
4 - Future developments and new projects

For my homework, I would like to present the AIRNODE oracle from API3 project.

source

1. History and Description. Does it have any token or cryptocurrency associated?

As, practically all the developments in the blockchain industry, I think that the main starting point to analyze, and explain the history of the project, is its white paper.

The API3 white paper was published in the September 2020, by Burak Benligiray, Sasa Milic, and Heikki Vanttinen.

The project, according to this document, as today is less than one year old, and it is currently in version 1.0.1, the token associated with this blockchain oracle developed on the ETHEREUM blockchain, is called API3, and it is listed in coinmarketcap website, in token position 423.

As it is possible to see from the screenshot, even if the token is not in the top 100 cryptocurrencies, and even amongst the oracle projects is not on the top 3, it is in 27172 people watch list, so this fact let me understand the interest that the public is showing for these oracle blockchain projects.

The token is listed in these exchanges according to coinmarketcap website

The main idea behind this project, as stated in the whitepaper, is

to create a new generation of
Blockchain-native, decentralized APIs, or dAPIs for short.

For these purposes as been designed the AIRNODE approach, it means that the API will be operated by first party oracles, so the organizations that own directly the API to invoke to interact with the blockchain, cutting out the third party oracles that operates as middle man between the API off chain, and the blockchain.

In other words, the organizations that are interested in interact with the blockchain will be able to set up directly an AIRNODE, that will directly link them with the DAPPS that will be developed in that BLOCKCHAIN.

2. Functionalities and real-life applications.

As said already the project is very young, and there are not many real-life applications already operational, but, the usage of the associated token and the AIRNODE deployments are the main real-life applications so far.

The API3 token gives to the holders the possibility to influence the governance of the project trough their DAO (Decentralized Autonomous Organization).

The holders need to stake their token in insurance pool in order to participate, and to generate DAO shares and get more influence, and to get a weekly staking reward for these efforts.

Staking the API3 tokens into the insurance staking pool, means that the staker provides a security guarantee, that why the name insurance.
The funds in the insurance staking pool fund are used to cover potential problems from dAPI malfunctions that the dAPI consumer might incur, creating a financial loss.

It is also possible to request a Dapi for your contract project or set up a AIRNODE if you are an API provider, but as I said, I can not see real operational and practical usage of this specific project so far.

3. Pros and Cons.

By reading their documentations, and white paper it looks like there are just pros, and practically no cons in this project, they even state that with their AIRNODE approach, they are able to solve the famous ORACLE PROBLEM, but in my opinion a more sober and a bit more impartial approach is better.

The ORACLE PROBLEM is quite simple to explain, and it means that due to the fact that a smart contract needs some data from the external world to function, and in order to collect and use these data within the blockchain it needs an ORACLE, if the oracle is not working properly of it is compromised, the whole smart contract will stop functioning properly.

They states they can solve this by the AIRNODEs that are operated directly by the API providers, and not by a third party that just connect external API and the blockchain.
Sure this approach is more stable, and more secure from an operational point of view, the API provider developed directly his own API, and of course will manage them in a more efficient way, and will keep them properly operational overtime, so I can say that this is a Pros.

The Con, in with this method, in my opinion is of course the inevitable centralization of this AIRNODE and Dapi approach, all the independent DEVS are cut out, and just centralized "institutional" api provider are allowed to create their node points, and this is against the decentralization that the blockchain wish to reach.

4. Future developments and new projects

As said before this is a very new project, that operates a very new technology, so practically the whole API3 company is something that will become stable and fully operational with future developments.

So far, because I saw a very detailed, white paper, and a functional website, and application on their GitHub, I think that they are more interested in the next future in a promotional campaign in order to attract as many API providers as possible, so that the smart contract creators will choose this project for their oracle node stability.