With over 9,000 coins listed on CoinMarketCap, it’s often extremely difficult to separate the signal (good coins and projects) from the noise (shitcoins and protocols that have little use) and which will gain adoption via real-world use case. The Graph Protocol (GRT), built by the Graph Foundation, is the real deal. Think of The Graph as the Google search engine for on-chain data gathering and aggregation. Although its initial tokenomics in its few years are bad and will benefit early investors only, the protocol has an extremely important use with the decentralized application (dApp) infrastructure. Projects like The Graph will play an instrumental role in the effectiveness and adoption of dApps.
A decentralized application is largely made up of smart contracts. These smart contracts execute based on certain conditions. In order for smart contracts to solve real-world problems, the smart contracts need real-world data. This data can come from on-chain (i.e. Ethereum) and off-chain data (like current prices) to the dApps. Oracle cryptocurrencies pull real world data into the blockchain through a decentralized consensus, which is important for maintaining crypto’s decentralized nature. The most used crypto for fetching this real-world data is Chainlink Data may also need to be stored in a decentralized manor for the dApp as well. For data storage, there are tokens like Filecoin.
The problem The Graph (GRT) solves
Users need to be able to see data that is happening on the Ethereum blockchain- let’s say a smart contract wants to know the price history of a plot of land on Decentraland. Finding the specific price histories of certain assets like NFTs or land is data that resides historically on the Ethereum blockchain. The Graph is a super powerful way to search the Ethereum blockchain and aggregate all of this on-chain data- something that might otherwise take a user hours to do.
To help illustrate, let’s say you’re planning on travelling to the UK for vacation. Because of COVID, you’re not sure if the country is allowing tourists from your country. What do you do? You run a Google search to find their state department’s website to see what the current policy is. In this case, The Graph protocol is Google, and the UK state department’s website is data on the Ethereum blockchain.
GRT is important for dApps
Right now, decentralized applications need all the help they can get to overtake their centralized competitors (like Amazon or Youtube, anything with a centralized server). This is crucial for the adoption of cryptocurrencies worldwide, as switching costs will be steep to get people off of centralized apps to get them to start using dApps. The process will take decades- who will want to abandon playing Grand Theft Auto V online for Axie Infinity just because Axie is decentralized? dApps need to have the highest level of performance and data security in order to have a fighting chance. The Graph protocol’s ability to efficiently pull and aggregate on-chain data like a Google search engine is key.
How GRT Works
GRT is a proof-of-stake crypto, meaning that if you own some you can stake the tokens to earn rewards. With a centralized application like YouTube or Netflix, you either pay a monthly fee or have to watch ads for that service to be provided for you. Much like how Ethereum gas fees have to be paid to move ERC-20 tokens around from wallet to wallet, there needs to be economic incentive for these query nodes to pull data. In order for The Graph Protocol to operate, a unique economic incentive system has been set up, with three different actors:
- Indexers– nodes that perform the on-chain search and gathering of data
- Delegators– nodes that ensure indexers are charging fair fees and finding good fees for nodes who require the information
- Curators– quality control nodes that vet information fetched by the indexers
If Indexers provide faulty or bad data, their stake of GRT tokens can be slashed. Curators and Indexers are rewarded with ETH or DAI. Everyone- Delegators, Indexers, and Curators, must abide by a 20-day thawing period to unstake their GRT tokens. This helps avoid mass selloffs and keeps network and price volatility under control. GRT is an ERC 20 token with a 3% annual inflation rate to pay Indexers. Some GRT tokens are burned with network activity- meaning with enough use of the Graph network, the GRT token could become deflationary. But much like with the Ethereum token, I think we’re a long ways away from having enough activity for the tokens to become deflationary.
Where to buy The Graph (GRT)
GRT is thankfully widely available thanks to its strong backing from investors making it into a high-visibility project. GRT is available on Coinbase, Gemini, Crypto.com, and Voyager Crypto. In order to stake the Graph, you can send your coins to your MetaMask wallet and then using the Graph staking UI to stake your coins and earn rewards. Altcoinbuzz has a guide to the whole process here.
The future of The Graph
GRT’s data protocol is already used across many decentralized DeFi entities including Uniswap and Decentraland, and will likely continue to see more adoption. The network already processes upwards of 1 billion data queries per day. The parent company to the project, The Graph Foundation will become a decentralized autonomous organization (DAO), much like how the Python Foundation governs the use of the python programming language, without profit-seeking. The Graph will be applied to future smart contract platforms as well- most likely Cardano, Polkadot, Solana, and Avalanche. Although GRT has shitty tokenomics, it will play a key role in allowing decentralized applications to compete with the centralized apps that created the monopolistic competitive environment we see today.