Home » API3 – Decentralized, transparent, and secure First party Oracles

API3 – Decentralized, transparent, and secure First party Oracles

by Brian Armstrong
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DeFi sector’s growth this year will always be marked in history. The interest levels, fund infusions, and overall trust in decentralized finance have triggered new dawn in the market.

But remember there is still space for reconstruction and resumption. 

The snag in the current process

A decentralized application’s role is to interact with the real world typically requiring asset prices to be delivered to its smart contract platform through something called a data feed. The data feed helps the application to interact with the real world allowing access to different services such as lending, borrowing, and much more. Businesses purveying services over Web API right from providing asset prices to the regular financial transactions should ensure that the decentralized applications are able to access these kinds of services that web APIs offer but unfortunately, APIs are not natively compatible with dApps. 

The existing solution is where an arbitrary system has to be interoperable with another arbitrary system through its technical interface in a very general sense. This involves the support of third-party oracles which is not an optimal solution. It is good in theory but in practice, it doesn’t hold good. 

Increased vulnerability, operational costs, and insecurity are what decentralization of today leads to. The data feed depends on 3rd party oracles that are less trustworthy compared to  API providers. Generally speaking, each  API provider is served by 2-3 oracles in such data feeds. More oracles mean more gas costs and that is not favorable.


As of now, the interface is not liberated from middlemen. Adding to this, the interface is centralized, not secure enough, and expensive and users still utilize it because they have nowhere to go. Understand that this is the problem API3 has taken upon itself to leap a step ahead and meet the uncompromising requirements of Web 3.0, sans any third party. API3’s dAPI as it calls presents a new generation of decentralized apps that are secure, cost-effective, and aims to provide traditional API service to smart contracts in an authentic decentralized way.

The Elements of dAPI include

  • Multiple APIs, meaning API is not restricted only to the technical interface but also the service of the real-world.
  • The decentralized governing entity so that activities of the oracle network can be observed
  • A decentralized network of first-part oracles operated by the API providers themselves.

API3 AirNode designed for first-party oracles

The API3 solution holds first-party oracles to the highest regard. Every single API is served by an oracle operated by the entity that owns the API instead of a third-party. API3 allows for the user of first-party oracles operated by the API providers meaning that they would be signing their responses with their private keys at the smart contract platform ensuring that the data is not tampered with. By default, first-party oracles are private, cost-efficient, and are at least 50% more efficient in terms of gas costs, which is transparent also. API providers operating the oracles will solve legal impediments as they need not be licensed by a third-party. It also resolves the rent-seeking third-party oracles problems allowing for the funds to flow to the zones which are working hard to serve the purpose. API3 incentivizes API providers benefitting it in the process.


For overall decentralization, API3 is governed by a DAO meaning that the governance will be decentralized, open and all the stakeholders can participate in the governance of the project directly. The API3 token will grant the voting power in the API3 DAO along with three other utilities:

1. Staking:  Offers dAPI revenue and inflationary rewards.

2. Collateral: supports insurance services protecting users from damages caused

by dAPI malfunctions.

3. Governance: Grants direct representation in the API3 DAO.

API3 is a collaboration that aims to build, manage and monetize dAPI at scale The project focuses on a completely open and direct governance model where any API3 token holder will be able to stake to obtain voting privileges.

Access this unique project’s whitepaper here.


The information discussed by The Coin Magazine is not financial advice. This is for educational and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Do your due diligence and rating before making any investments and consult your financial advisor. The researched information presented we believe to be correct and accurate however there is no guarantee or warranty as to the accuracy, timeliness, completeness. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. Copyright The Coin Magazine All rights reserved.

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