The early days of the Internet were an interesting time. Following the emergence of the World Wide Web, suddenly, a huge amount of information became easily available to the general public (relatively speaking, of course – the sound of my modem trying to connect to the Internet still haunts me to this day!). Soon it became apparent that people needed a way to navigate their way through this ocean of information. This is what led to the emergence of search engines and the rise of the service that eventually became synonymous with Internet search – Google.
Today, some 20 years later, the World Wide Web is on the brink of undergoing another transformation, with blockchain and DLT fueling an unprecedented move toward decentralization. At the same time, the ‘Web3’ space is facing a familiar problem, stemming from the growing demand for ways to quickly access relevant information stored on blockchain and DLT-based platforms. The Web3 space needs its own Google. This is the problem The Graph protocol aims to solve
The Graph Protocol Explained?
One of the commonly used techniques for making finding information easier is indexing. Technique makes use of references pointing to particular data entries so that these entries can be accessed without having to search through an entire database. In fact, this approach predates the digital age by quite a bit and can be traced back to physical books, where indexes are used to mark the pages on which specific entries (for example, book chapters, encyclopedia entries, etc.) can be found.
The Graph seeks to utilize this approach in the context of Web3. It is an indexing protocol for querying blockchain networks like Ethereum and IPFS (InterPlanetary File System). The protocol allows for people to build open APIs called subgraphs that make blockchain data easily accessible. But before we delve into the details of how the whole system works, we first need to take a look at
Why is The Graph?
Well, we already established that we need some sort of a tool to help sort through blockchain data. Going through the Ethereum ledger block by block, for example, would be painstakingly slow and a very time-consuming way of finding relevant information. So, undeniably, a better approach is needed.
The thing is that there are already websites like Etherscan that provide easy access to blockchain data, so why even bother with another solution? What sets The Graph apart?
The main difference is that unlike existing blockchain data providers which are owned and operated by private companies, The Graph aims to provide a truly decentralized solution and, in this way, to preserve the trustless nature of the DLT space. Another key difference is that The Graph’s technology will enable dApps to access all kinds of blockchain data and not be limited to the information provided by a particular data provider.
So how does The Graph protocol plan to achieve this? Well, let’s examine how The Graph works.
What are the technical elements of The Graph?
In essence, the Graph is an infrastructure protocol whose purpose is to bring a new functionality, in this case – indexing, to the existing blockchain ecosystem. As such, it follows the core principles of a typical blockchain system, but is also designed to perform some specialized functions. To achieve that, participants in The Graph’s network perform specialized tasks, specific to their roles in the network. There are three main types of network participants.
Indexers are the node operators of The Graph network. In order to join the network, indexers need to stake The Grapph’s native token, GRT, and run a node. Their primary function is to index relevant subgraphs and process queries. For these services indexers earn query fees and indexing rewards. Query fees are handled through a recently launched microtransaction system called Scalar, which facilitates direct payments to indexers via state channels. Meanwhile, indexing rewards are generated via a 3% protocol-wide annual inflation.
These are network participants that signal to Indexers which subgraphs should be indexed by the network. The way this works is that they deposit GRT into a bonding curve to signal on a specific subgraph and earn a portion of the query fees for the subgraphs they signal on.
DApp developers, data consumers and other community members can all be curators and use their knowledge about the Web3 space to assess subgraphs. Notably, the indexing reward for a specific subgraph depends on the number of curator signals it has received, meaning that the more popular a subgraph is, the higher its reward is.
Delegators are people who can participate in the network by delegating stakes to Indexers. In this way, people who don’t want to run their own nodes can still contribute to the network and earn GRT, as they receive a portion of the query fees and indexing rewards of the Indexers they have delegated to. Delegators have to pay a 0.5% fee every time they delegate.
What are the Benefits of using The Graph Protocol?
DApp developers typically have to choose between performance and decentralization, but The Graph eliminates this problem when it comes to data queries. By using relevant subgraphs, dApps are able to easily retrieve the blockchain data they need without having to rely on a centralized data provider.
Flexibility and convenience
Rather than having to build their own query services or be limited to the blockchain data provided by a third party, developers can use subgraphs to supply their dApps with relevant data. A dApp can leverage one of multiple subgraphs depending on its needs. On The Graph’s website, users and dApp developers can already find a significant number of readily available subgraphs. Alternatively, people can create their own subgraphs that are tailored to their specific needs.
Infrastructure for a decentralized web
Most importantly, The Graph protocol has the potential to contribute to the development of a solid foundation for the fledgling Web3 space and improve the utility of decentralized applications considerably. The technology is poised to remove one of the biggest bottlenecks that Web3 developers are currently facing.
The utility of the protocol has already attracted the likes of Uniswap and Synthetix, as well as other major players in the DeFi space.
A brave new web
Some 20 years ago, for me, it was the beeping sound of my modem that heralded each new encounter with the wondrous, but still young and messy world of the World Wide Web. But even in its earliest form, the potential of this new and exciting medium was already clear. Since then, countless developers have helped realize that potential by developing infrastructure, tools, and innovative services.
Thanks to the blockchain revolution, we’re now ready to take the next step in this journey, and thanks to exciting new technologies like The Graph protocol, we have every chance of succeeding.