The Graph (GRT) is an Ethereum-based decentralized and open-sourced indexing protocol for blockchain-based projects.
In the shift towards full decentralization, one aspect of the blockchain often left behind is data indexing. For anyone to be able to access blockchain data and make queries, they have to interact with third-party data ingestion services like Etherscan, studio, or Apiary.
You might have heard of The Graph recently. Its aim is to create decentralized indexes and API feeds that blockchain projects and cryptocurrency users can benefit greatly from. Today, projects like Balancer and Uniswap are already running a protocol on a hosted version of The Graph. But how does it create a permissionless and trustless information ecosystem?
A group of software engineers led by Yaniv Tal, co-founder of The Graph, found that while the blockchain was designed to be a transparent ledger of data, it currently does not work that way. The difficulty in fulfilling queries related to transaction information, as well as linking them in blockchain applications defeat the purpose of the technology.
Tal and his team has had their fair share of developing applications on the blockchain before. What got them frustrated, however, was the absence of an indexing and querying software for the blockchain. Everyone who wanted to build an application had no option but to find their own way in gathering data from multiple sources and put them together.
While there are third-party data providers that ingest blockchain information and make them publicly-accessible for querying services, they are not completely trustless. And in achieving full decentralization, it doesn’t help that data-related functions are left to different entities.
Thus, The Graph was introduced. It was designed to be a middle layer between decentralized applications (dapps) and blockchains— feeding reliable, accurate, and timely information without the need for any third-party involvement. The work behind the protocol was meticulously done and it took the team three years before its mainnet was launched.
What is The Graph?
The Graph (GRT) is an Ethereum-based decentralized and open-sourced indexing protocol for blockchain-based projects. It links dapps and blockchains together to enable a frictionless and trustless interaction. Through the platform, anyone can make queries on the blockchain without much cost, while incentivizing those who participate in the maintenance of its index.
To put it simply, The Graph is like Google for blockchain. Developers would not have to develop a different platform altogether just to be able to feed data on their dapps. The protocol can do it for them, they just have to make a query, completely similar to what you’d do when you’re looking for something through Google.
How Does it Work?
The Graph currently has two main sources of blockchain data: Ethereum and the Interplanetary File System (IPFS).
Normally, it is difficult to find specific transaction information on the Ethereum blockchain. While you may be able to locate what you are looking for, it might take a very long time since you’ll have to scan through different blocks first. That is why indexing is necessary.
This is exactly what the protocol does first: it indexes blockchain data. This is where The Graph organizes each information before a search even happens. This works like Google, where it crawls the whole internet, analyzes them for content and meaning, and groups them together in a single index. This way, anyone can receive fast results to their query.
The GraphQL is the querying language that basically functions to segment information into relevant chunks that searchers could be particularly interested in. Then, the data that can be indexed is grouped into “subgraphs.” This is what the consumers access whenever they make queries on the platform.
These subgraphs can contain more subgraphs. The purpose is to be able to come up with a filtered set of data that is relevant to a user’s query. If they have to sift through all the subgraphs from other platforms, they can freely do so in The Graph’s explorer.
Details such as volume of transactions per trading pair, volume of all transactions, and many others, are just some of the few examples of information that they can access conveniently through the platform in any query.
The Graph Ecosystem
There is a whole ecosystem that the project came up with to make the whole process work trustlessly: indexers, delegators, and curators. They perform specific tasks in keeping the protocol intact.
These are the node operators of the protocol. Anyone can be an indexer, they just have to stake the platform’s native token, GRT, and run an independent node. Their main role is to index all the subgraphs depending on their relevance to several queries. In return, they receive incentives and a share from the fees whenever they service some queries.
They can belong to the developers of subgraphs, data consumers, or other community members, whose main task is to determine for Indexers which subgraphs to index. Basically, their role is to identify the subgraph that is worthy of indexing. In order to become a curator, a user has to stake their GRT on a subgraph that they want to signal. They earn a portion of the fees too if the subgraph that they signal on is used in a query. There is a bonding curve model, however, that staking in a subgraph follows. This means that if they are one of those who signaled early on a subgraph, they have bigger curation shares.
These are protocol participants who want to contribute to network security without having to run a node. They earn a portion of the fees from queries and the rewards gained by the indexers they chose to delegate to. In order to do this, users have to stake their GRT to an indexer. Selecting an indexer can be based on different performance metrics such as their query fee rate, uptime, and other factors.
Fisherman and Arbitrator
The role of these participants is simply to help in the settlement of disputes, such as when the data provided by indexers are inaccurate. The fisherman checks on the correctness of the response to a query and the arbitrator decides whether the indexer is malicious.
The GRT token is The Graph’s native ERC-20-based token. It can be used as a medium of exchange, payment for query fees, as well as staking. It also serves as the backbone of the platform’s reward system. There are many ways to stake your GRT token, it all depends on the role they want to play in the protocol’s ecosystem.
They can either stake their token to be an indexer, delegate another indexer, or become a curator.
The Graph Council
With the objective of fully decentralizing the governance of the protocol, the network is working on the future implementation of a Decentralized Autonomous Organization (DAO).
This will be a community-based governing body of the platform where GRT holders can vote on the direction of the protocol. They can decide on protocol upgrades, allocation of grants and ecosystem funding, as well as other important protocol changes.
While the success of decentralized finance (DeFi) banks on valuable projects that mirror, if not overcome, traditional finance, it certainly relies on access to blockchain data. If projects find it difficult to gather relevant information, or rely on a centralized provider in order to collect the data they need for them, we can never achieve full decentralization.
The Graph is a promising project that complements the goals of DeFi. It effectively indexes blockchain data in a way that doesn’t cost much on the part of developers and users. It also provides end-users with the capacity to benefit from maintaining an information ecosystem that no third-party provider has control over.