Decentralized API (dAPI)
Understanding Decentralized API (dAPI)
Decentralized API (dAPI) refers to APIs that are built on blockchain technology, offering a completely decentralized approach. Unlike traditional APIs, decentralized platforms utilize blockchain technology to provide decentralized APIs. An example of this is decentralized applications (dApps) that operate on a decentralized system powered by dAPIs. While dAPIs offer similar functionality to conventional APIs, they differ in their decentralized nature and compatibility with blockchain technology.
To fully grasp the concept of decentralized APIs, it is important to have a clear understanding of what an API is. An Application Programming Interface (API) is a well-defined mechanism that enables communication between web and mobile apps by facilitating the transfer of data and services. Companies can now offer their data and services as marketable service modules through APIs, which developers can integrate into their own apps. This significantly enhances the efficiency of software development in terms of cost and time, compared to the traditional approach of building everything from scratch.
The distinction between centralized and decentralized APIs is evident. In a decentralized system, the API gateway redirects queries to various API endpoints, which can be the backend of an application or a public API of a trading partner. The API gateway handles protocol, security, and data conversions during runtime. On the other hand, in a centralized arrangement, the data is stored in a central data store within the API platform. This central data store maintains real-time synchronization with backend applications and business partners through asynchronous connections. API queries are sent directly to the central data storage in this scenario.
The Oracle Problem
The “oracle problem” refers to the challenge of smart contracts accessing data that is not already available on the blockchain. Smart contracts, which drive decentralized applications, cannot directly access APIs from the blockchain where the contract is stored due to the unique security assurances provided by a decentralized network of nodes. To overcome this issue, a solution is required that allows smart contracts to access API data while maintaining the security of the underlying system.
Decentralized API services address this problem by managing various data providers on the blockchain. Unlike existing decentralized oracle solutions, dAPIs encompass the APIs that provide the data feed within their scope. This ensures greater data transparency down to the true data source level, distinguishing them from other decentralized oracles.