Introducing Managed dAPIs: Building Trust through Source Transparency

What are Managed dAPIs?

One of crypto’s core mantras is “Don’t trust, verify.” In the rapidly evolving landscape of the Web3 data economy, finding reliable and transparent ways to connect real-time market data with smart contracts has become paramount. Decentralized APIs (dAPIs) are first-party data feeds that link API providers directly to oracle smart contracts, providing end-to-end transparency. By eliminating third-party intermediaries and enhancing data integrity, dAPIs offer developers a secure, reliable, and scalable approach to getting real-world data on-chain.

Managed dAPIs are multi-source data feeds available as a managed service by API3, providing developers with high-quality reference data served on-chain by first-party oracles. Managed dAPIs are set to change the way decentralized applications (dApps) interact with off-chain data, establishing a new standard in fostering trust through data source transparency. They embody the core values of blockchain technology and offer a developer-friendly experience by providing operational oversight. With seamless access to reliable, high-quality data, managed dAPIs unlock new possibilities for developers and blockchain networks.

What Makes Managed dAPIs Better?

Managed dAPIs offer an array of features that not only ensure reliability and efficiency but also significantly improve security. In the rapidly changing oracle space, these attributes make managed dAPIs the ideal choice for dApps looking for accurate, reliable, and secure data.

First-Party Oracles

Managed dAPIs use first-party oracles, with data served directly from reputable API providers via the API3 Airnode. This direct connection eliminates the need for third-party intermediaries, reducing the possibility of data manipulation or bias. The first-party oracle architecture fosters an environment of trust through source reputation and end-to-end transparency. The ability to verify the data source on-chain gives developers confidence in the integrity and accuracy of the data they access.

Multi-source Data Feeds

Managed dAPIs are multi-source data feeds, aggregating data from numerous first-party oracles. This ensures a broad and diverse range of data points, which collectively contribute to the overall accuracy and reliability of the data. Each beacon or data point in a managed dAPI represents a unique provider that is verifiable, ensuring data integrity and reducing potential bias.

Push Oracle Architecture

Managed dAPIs utilize a push oracle architecture, meaning data is actively pushed to the blockchain and readily available for dApps. This push architecture enhances efficiency and ensures timely data feed updates, benefiting both developers and end-users. This oracle design also makes it easy for dApps to migrate from existing oracle services.

Improved Security With Native-chain Aggregation

Ensuring data security is a critical feature of every oracle service. To provide maximum security, managed dAPIs use native-chain aggregation, a method that combines data on the same chain that the oracle is being used on. Native-chain aggregation maximizes security by eliminating the need for bridges, which come with their own risks and vulnerabilities. With native-chain aggregation, developers can be assured of a secure and reliable data feed.

These features make managed dAPIs a powerful solution to building better oracles for the DeFi ecosystem. By focusing on end-to-end transparency, high-quality data sources, efficient data delivery, and robust security, managed dAPIs are setting a new standard for how dApps access real world data on the blockchain.

Accessing Managed dAPIs

Managed dAPIs are designed to be developer friendly and easy to implement. Managed dAPIs will be available on the API3 Market, offering developers easy access to aggregated data feeds. The market will offer a range of multi-source dAPIs with various deviation thresholds and heartbeat specifications, giving developers the flexibility to choose a service that aligns with their unique requirements.

While any existing dAPI is always free to read, the creation of a new multi-source feed requires the user or ‘sponsor’ to pay for the upgrade to create the data feed. Users are required to pay for the upgrade to a managed dAPI in native chain currency to cover the operational expenses associated with gas costs. This sponsor essentially upgrades the service to a multi-source data feed, upon which API3 creates and maintains the new aggregated feed. Once established, this feed becomes accessible to all users, as long as the sponsoring dApp continues to fund the managed dAPI. The flexible and scalable nature of the service accommodates changes to contracts during their term, providing additional scalability to developers.

Operational Oversight

The API3 DAO dAPI team provides 24/7 monitoring of managed dAPIs, ensuring that wallets and API responses are continually checked for reliability and security. dAPIs can also be updated or ‘re-mapped’ by the team to meet evolving requirements, ensuring a continuous improvement cycle. This level of operational oversight ensures that managed dAPIs maintain their integrity and reliability at all times.

Simple Integration

Managed dAPIs have been designed for easy integration. Comprehensive documentation and guides are available to simplify the process, and a dedicated developer community is on hand for technical support and best practices. Whether you’re a seasoned developer or a newcomer, you’ll find the integration process smooth and intuitive.

Managed dAPIs are supported across 12 different networks, including Ethereum, Arbitrum, Polygon zkEVM, and Optimism, with data feed contracts adapted to the specific duration limits of each chain. This multi-chain support expands the reach of managed dAPIs, providing more opportunities for developers and blockchain networks to leverage the power of decentralized data feeds.

Paving a Road to Better Protocol Performance with Oracle Extractable Value

As we progress into the next phase of our dAPI rollout, we are turning the challenges posed by Maximal Extractable Value (MEV) into an opportunity for optimizing the DeFi ecosystem. Traditionally, MEV has been a source of significant lost value for dApps and contributes to a poor user experience. API3 is working to address these challenges by designing a process to capture Oracle Extractable Value (OEV), a subset of MEV related to oracle updates.

Outlined in the API3 OEV Litepaper, we will be introducing an off-chain marketplace that allows dApps to auction off meta-transactions signed by first-party oracles for updating data feeds. Searchers bid for the right to perform these oracle updates, capturing the MEV associated with the transaction. This shared benefit model ensures that price feeds are updated according to the dApp’s needs rather than being updated solely by deviation thresholds, similar to a pull based oracle.

The transformative aspect of OEV lies in the fact that the value captured by searchers is shared with the dApps through the auction process. This approach minimizes the negative impacts of MEV extraction, fostering the creation of accurate and low-latency oracles, which in turn enhance protocol performance and efficiency.

One of the profound impacts of OEV is its ability to create more accurate and low-latency oracles, which increases the profitability and sustainability of liquidity provision. This, in turn, improves market-making and attracts more liquidity to the application, fostering better performance and a better user experience. By introducing a process to capture OEV, API3 demonstrates the power and potential of managed dAPIs and paves the way for a sustainable, profitable future in DeFi.

Building a Better Oracle Service with Managed dAPIs

Managed dAPIs are changing the way dApps access and handle data on the blockchain. They present a significant leap towards realizing a truly decentralized data economy by addressing critical issues concerning data integrity, security, and transparency.

By leveraging managed dAPIs, developers and network can take a proactive step towards fostering transparency and reliability by building on the “don’t trust, verify” principle, consequently delivering a better user experience and building long-term trust with their users.

We encourage developers and blockchain networks to explore our technical documentation to learn more about using managed dAPIs to power their applications.

Explore managed dAPIs today and join us in building the future of decentralized finance.