This proposal seeks to bring API3 data feeds, called dAPIs, to Celo that will give developers access to a wide variety of data, hence opening the door for immense ecosystem growth for the network. API3 data feeds would be rolled out in two phases. With Phase 1, API3 would be introducing self-funded data feeds to the Celo network, which is oracle infrastructure that can be accessed permissionlessly by anyone. These data feeds simply need funding to be sent to a specific wallet and they will begin operating automatically. Self-funded data feeds are single source, which is why managed data feeds are introduced with Phase 2, which will bring with it aggregations and gas management by API3 and its partners.
This proposal was drafted by the dAPI team of the API3 DAO.
Celo prides itself with building things that matter in the real world while having accessibility for everyone, sustainability for the world and scalability in mind. Many of the use cases that allow for the development of DeFi and ReFi primitives rely heavily on data to the real world, which means that this data somehow has to find its way onto Celo. This is where oracles come into play. They fetch data from the ‘real world’ and bring it onto the blockchain so that dApps can utilise them to build, innovate and create.
About API3 – First-Party oracles for the masses
When it comes to oracles, many of you probably only heard about Chainlink, and for obvious reasons it is also one of the proposals that this one is standing up against in this forum. As a matter of fact, we at API3 began as Chainlink node operators ourselves, before we realised we can accomplish things more efficiently and more transparently by making data sources run oracles themselves directly instead of relying on a middlemen layer to operate them.
With this mission in mind we developed and built out an oracle solution that is optimised for data sources instead of middlemen and we’ve specialised in and coined the term ‘first-party oracles’. Mainly third-party oracle networks, like Chainlink, already must trust in these same data sources, but additionally involve several third-party node operators in fetching and bringing required data on-chain. Not only does this approach involve more people in the process, and hence requires more trust, but it also drastically increases costs of operating an oracle network because of efforts made to secure this middle layer, through e.g. staking mechanisms, as well as paying these third parties alongside the data sources.
In addition, third-party networks most often do not reveal which and how many data sources are used within their products, which practically goes against everything web3 and the blockchain industry stands for – transparency and verifiability. All that you can see is black boxes spitting out numbers, which are then aggregated without any ability to verify how they came up with them. This opaqueness creates a huge transparency and trust issue because how can data consumers confirm what we are actually consuming without trusting a centralised entity and their word? How can the risk profile of a feed be assessed if the makeup cannot be determined by everyone independently of a single entity? How do you know that this entire oracle network isn’t depending on a singular data source? It all boils down to trust - the thing blockchains were supposed to minimise or even remove entirely.
First-party oracles change this. When the data source runs the oracle and you aggregate between these sources you:
Remove trust that was introduced with the addition of middlemen that simply relay data
Remove costs that were introduced with the addition of middlemen
Remove opaqueness and create fully verifiable end-to-end transparency between data producers and data consumers
Most of the API providers that power Chainlink nodes by giving them their data are actually running API3 oracles themselves directly. Among these are Finage, NewchangeFX, TwelveData, dxFeed and many more. This means that by choosing API3 data feeds, you’re receiving data directly from them, instead of receiving the same data relayed through a third-party network.
API3 differentiates its data feeds between self-funded data feeds and managed data feeds. Self-funded data feeds can be seen as an introduction and basic oracle infrastructure. They are single source and have an associated wallet. A self-funded data feed will begin operations whenever funds are made available to it and can be accessed entirely permissionlessly, and will stop operating whenever these funds run out. We have recently released the first phase of our data feeds, self-funded data feeds, and they can be accessed on over 10 networks and 11 testnets. You can find and play around with them on the API3 Market. They are a great introduction and can also be used as “plug-and-play” oracles.
Managed data feeds can be seen as the ‘pro’ version of API3 data feeds. Here, data feeds are aggregated between multiple first party oracles with API3 and the data sources picking up the gas management overhead. Self-funded data feeds will be upgradable to managed data feeds over the API3 Market by paying for them. Managed data feeds are expected to be available within Q2 of this year.
In both cases, self-funded and managed alike, data is accessible for free by anyone once it is on-chain. This means that if Celo decides to allocate funds to self-funded data feeds or pay for upgrades to managed data feeds, everybody on the Celo network will be able to benefit from them for free.
To bring API3 data feeds to Celo, we’re asking for 50,000 USDC as a one time integration payment with an additional 40,000 CELO per month payment over a year, totalling 480,000 CELO, for the following things:
25,000 USDC upon integrating self-funded data feeds to both Celo Mainnet and Testnet and making cryptocurrency and forex data available on Celo and accessible over the API3 Market, which can be accomplished within 1-2 weeks after approving the proposal.
An additional 25,000 USDC payment upon making managed data feeds available on Celo Mainnet, expected to be ready within Q2 of 2023. Managed data feeds will also make equities and commodities data available alongside the other offerings.
40,000 CELO per month when managed data feeds are ready to upgrade and make access to managed feed available for free to anyone building on Celo
In addition, API3 will, in collaboration with all available data providers strive to fulfil any data wishes that the Celo ecosystem might have. Our providers are willing to provide traditional financial instruments, cryptocurrencies and can also build out specialised solutions where there is demand for it.
The 40,000 CELO per month will be used to cover gas costs for operating managed data feeds. API3 will make a public dashboard available that will list our consumption in detail. In addition to the gas costs we’ll be charging 20% of the consumption as our revenue. This revenue will cover infrastructure costs of API3 and the data sources operating oracles. Any unspent CELO after gas costs and our revenue margin will be sent back to the Celo community fund after a year or kept and counted towards the balance for another year if a follow up engagement between API3 and the Celo Community materialises.
An example calculation could look like this:
API3 receives 40,000 CELO each month for a year totalling 480,000 CELO.
Gas costs come in at 20,000 CELO per month for the entire year, totalling 240,000 CELO.
API3 charges 48,000 CELO as revenue margin to cover infrastructure costs
192,000 CELO are left at the end of the year, which is returned to the Celo community fund
We do not expect managed data feeds to cost 40,000 CELO per month, but to account for gas spikes, increased demand in new data feeds and other unforeseen events, API3 wants to maintain a reasonable balance to accommodate for any wishes or issues. Additionally API3 also maintains its own gas management balances that will be used if any shortcomings arise due to any unforeseen events.
Management of funds and transparency for the Celo Ecosystem
The data feed management team of API3 operates multisignature wallets on each chain that our data feeds are available on. These wallets are used to spread out required funds as well as manage data feeds in accordance with our security considerations. Requested CELO would be made available to this multisignature wallet and returned from here as well. API3 also collects all data feed related blockchain data and makes available statistics, which will allow us to build dashboards that can display data feed performance and consumption in real time, akin to our QRNG dashboard, allowing the Celo Community to track everything seamlessly thus holding API3 accountable at all times.
The Celo ecosystem has massive potential and the introduction of easily accessible data feeds will help immensely to bring it to fruition. API3 is uniquely positioned to help the Celo ecosystem in this endeavour by delivering data in a fully transparent, scalable and efficient way, which will help the Celo ecosystem grow within its aspired areas of DeFi and ReFi.
I am aware that there is already a conflicting oracle proposal present, which is why I am making myself available for any questions, community calls or other things that the Celo community might need in order to process this proposal. I thought it was important to offer an alternative to what I think is an unreasonable amount of money that is being asked for by an industry leader. Obviously the Celo community is still free to go with the other proposal; we merely wanted to have presented an alternative in your governance discussions.
You can read more about API3 on our website and in our data feed docs.