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Monetize an API in Web3

The goal of API3 is to provide smart contract developers with an easy way to access off-chain resources from within their smart contracts, without having to worry about the security and trust implications of doing so.

To achieve this goal it is imperative API3 enables those operating off-chain resources to be able to easily serve and monetize their data in Web3.

Airnode is built with API Providers in mind

API3 communicated with API providers extensively and observed a number of obstacles that might prevent them from oracle onboarding and operation. The key insights identified were:

1. API Providers are not familiar with blockchain technology
2. Hiring for skill sets of blockchain validator operation is difficult
3. API Providers do not want to use cryptocurrencies

Familiarity with blockchain is not required

From observations we understand that traditional API providers are typically not familiar with blockchain technologies, including those that curate cryptocurrency market data. Typically an API Provider's main operation is collecting data from exchange APIs, processing them, and serving the result through their own APIs.

The key insight is that typically an API Provider cannot readily operate an oracle node in-house. As such, Airnode has been designed to not require blockchain development skills. Within the ecosystem tooling can be used to deploy and manage Airnode and the first-party oracle feeds.

Making oracle node operation pragmatic

Operating a third-party oracle node consumes a lot of resources in the form of person-hours and infrastructure costs. At the same time there is no job market for oracle node operator. Thus unless subsidies or profits are immediately provided, operating an oracle node is financially infeasible.

Airnode is open source and free to use. It's a pragmatic tool to enable API Providers to monetize to on-chain services that doesn't require investment in skills or infrastructure.

No need to handle cryptocurrencies

Operating an oracle node requires the API providers to transact with cryptocurrencies. Specifically, they must pay for gas costs in the native currency (e.g., ETH) and receive payments in one or more cryptocurrencies. This disqualifies the vast majority of API providers for compliance-related, legal and accounting reasons. In addition, any scheme that requires API providers to stake funds is categorically rejected for similar reasons related to financial risks.

Airnode has been designed so that the API Provider doesn't need to handle cryptocurrencies. For example, the Airnode requester can be funded by the dApp operators and oracle authentication can be paid directly to an API Providers bank account.

Considerations for API Providers

Whilst API3 embraces the ideology of a decentralized web and the power of open source, like all design decisions, the advantages to the first-party architecture presented also have tradeoffs that should be understood.

Benefits

• First-party oracles overcome the significant disadvantages of third-party oracle node solutions that use middlemen to deliver APIs to the blockchain.
• Airnode's simple design and set and forget philosophy avoids the time, complexity, and cost of other third-party oracle node solutions.
• Airnode is stateless and treats the blockchain as the single source of truth. This alone solves the majority of operational problems of traditional third-party oracle nodes while providing an overall higher level of simplicity.
• By not requiring Airnode operators to own any cryptocurrency, API3 provides countless traditional API providers access to the rapidly growing blockchain market and to innovative use cases for their data.
• Airnode and other API3 projects are open source and developed on GitHub.
• Due to its stateless nature Airnode is inherently more secure than other solutions. Nonetheless, API3 remains highly focused on security and has a track record of favorable external security audits.
• API3 does not charge for deploying and using Airnode. Under the AWS lambda free tier, operating an Airnode can even be free.

Tradeoffs

• Some knowledge about how Airnode works is inherently necessary. The API provider needs to understand how to configure an Airnode for successful deployment, while requesters need to understand how to make the requests. API3 aims to make this as convenient as possible for both parties.
• When an API provider begins using Airnode, they become a "vendor" and therefore forfeit some control over technical aspects of API delivery.
• Airnode is designed to periodically wake up, check for any new requests, and process them. This means that there is a window in which Airnode "sleeps". This is generally not problematic since the specific time a response transaction is recorded on-chain is never guaranteed and this "sleep time" is configurable, but can lead to higher response time for requests.

The advantages that Airnode provides will greatly outweigh the tradeoffs for the large majority of use cases.

Oracle tooling

Providing the appropriate preparation has taken place deploying Airnode is a simple and low-effort process that doesn't require specific developer resources and benefits from the set and forget design principles.

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