One of the most valuable technologies to emerge from the crypto space is smart contracts. Using smart contracts instead of centralized intermediaries has proven to be both more profitable and more convenient for those who know how to use them. There's just one small problem many smart contracts today are limited by their ability to effectively fetch data from the blockchains.

They're built on this means that developers must spend extra time and money to manually gather that data themselves if they want to build a new decentralized application or improve an existing one. If smart contracts and decentralized applications are truly going to replace their centralized alternatives there needs to be a more effective way to query the data required to build and maintain this much-needed data indexing layer.

This is exactly what the graph aims to be the global graph of all the information on smart contract blockchains.

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A little history abt graph

The graph was founded by electrical engineer Yaniv tal computer scientist Janis Pullman and roboticist Brandon Ramirez. The trio had previously worked together on several startups building developer tools for various applications. After a while, they started to wonder why it was so hard to build developer tools and realize it was fundamentally due to a reliance on centralized databases.

For those who don't know if you want to build a regular application, you need to use a database. Chances are that this database will be owned by a tech giant such as Amazon, Facebook, Apple, or Microsoft. In addition to the poor track records, these companies have of handling data any changes made to that data can have huge ramifications for both app developers and users. Since these companies are also not too keen on openly sharing the data they own in custody it results in data silos. Which makes it incredibly hard to build truly powerful applications.

When the trio came across ethereum in 2017 they became obsessed with its potential and started building decentralized applications on the ethereum blockchain. However, they immediately encountered another bottleneck although ethereum has a lot of data that are openly accessible to developers. Combing through that data is incredibly difficult and this makes it impossible to build more complex daps without excessive amounts of lag. They decided to solve this problem by building a data indexing protocol for ethereum and ipfs that would eventually become known as the graph, an initial white paper for the project was written in march 2017.

The graph was officially announced over a year later in June 2018. The graph only recently completed its ICO and its grt token started trading on major exchanges last week which took many by surprise First we need to understand what the graph is and how it works.

What is graph?

To really understand what the graph is and why it's so important to the crypto space we need to take a second to review how decentralized applications work. For the sake of simplicity, a decentralized application is made up of a series of smart contracts working together in unison.

Smart contracts are immutable programs that automatically execute a series of actions or transactions when a certain set of conditions are met. Most decentralized applications are built on ethereum which is why it's the second-largest cryptocurrency by market cap. As many of you will know there are many different types of decentralized applications. With defi applications like uniswap, maker dao, and aave being the most popular. For a decentralized application to work it needs data that is, On the ethereum blockchain also it needs data that is off the ethereum blockchain and it also needs somewhere to store any data its users generate.

The easiest example of off-chain data is the price this real-world data must be fed into the ethereum blockchain and pushed to the decentralized application that needs pricing data. This is done using a centralized oracle like chainlink or bannd protocol. Without the real-world data provided by these oracles, very few decentralized applications would work. This is why the chainlink is also one of the largest cryptocurrencies by market cap.

Moving on in terms of storage you have projects like filecoin and cea which offer decentralized data storage. There are also decentralized data storage protocols that are native to ethereum like storge. For the time being, most data generated by apps on ethereum is simply stored on the ethereum blockchain without the use of an elaborate protocol.

This brings us to the last piece of the puzzle data on the ethereum blockchain since ethereum is open source you can see all the code that constitutes a decentralized application as well as any data that's been generated by that decentralized application. Suppose you want to build a marketplace aggregator dapp on ethereum where users can see all the parcels of land being sold on ethereum based virtual worlds like decentraland and the sandbox this would entail fetching data from each marketplace and adding it to your marketplace aggregator.

Again since everything on the ethereum blockchain is open-source this would be quite easy to do and the simplicity of the data being requested means it probably wouldn't take a very long time for your dap to find it. However, suppose you wanted to add a feature that would allow people to see the selling histories of each of these marketplaces during specific time periods. After all, people who are in the business of flipping virtual land might want to know that sort of detail finding. This sort of specific data could take hours or even days for the dapp to do making it impossible for land traders to get the up-to-date information they need to execute an effective flip. It would also, be difficult to write the code required.

To make it possible to fetch this specific data as a developer the graph solves this issue by making it easy for developers to quickly fetch both complex and simple data on the ethereum blockchain that their dapps need. The graph is the third and final component of the puzzle, the data sorting layer between the blockchain and dapp. It makes existing dapps more efficient and makes new dapps easier to build this, in turn, increases the likelihood that dapps will eclipse their centralized competitors and usher in the new era of decentralization envisioned by so many including me. So how the hell does the graph work?

How does graph work?

The graph functions as a sort of marketplace for specific data that's on ethereum. Each data set on this marketplace is called a subgraph and can be seen using the graph explorer. As you can see there are subgraphs for data from dapps like uniswap compound USDC and even decentraland.

Each subgraph is basically a description of specific smart contracts within those dapps and any values in them that would be relevant to someone building a new dapp using that data. You think of this as being the equivalent of using bookmarks and a highlighter on a textbook. A copy of every subgraph description is stored on the ipfs the decentralized data storage layer of filecoin. Now using the graph explorer, a dapp developer can easily request the data that they need for their dapp.

Using the graph's own intuitive querying language called graphql, when a data request is made by a developer nodes on the graph network called indexes search through relevant subgraphs to find the information being requested. Indexers choose which subgraphs to pull the data from based on something called a curation signal that's provided by curators.

Curators develop subgraphs and assess them for their quality. Naturally for this process to work there needs to be some series of economic incentives. As such anyone searching for data using the graph explorer must pay indexes query fees which are set by the indexes themselves and payable in eath or die indexers also earn inflationary indexing rewards in grt tokens.

To ensure that indexers do not overcharge developers for their services delegate a stake grt to let the graph protocol know which indexes to use to fetch data for developers. Delegators earn a portion of query fees and indexing rewards for this service. To ensure indexers actually do their job they must stake grt tokens if an indexer provides incorrect data or does a poor job of indexing part of their stake can be slashed. To ensure that curators are leading indexes to the highest quality data they must stake grt tokens on a subgraph bonding curve which is the curational signal used by indexes.

How this works is a bit too complicated for this article but the main takeaway is that the bonding curve gives incentive to curators. To be the first to stake on a new subgraph they believe has high-quality information. This is because curators earn a cut of the query fees paid to indexers and curators who staked the earliest on a subgraph being queried will earn more of the query fees allocated to curators thanks to the bonding curve.

Although curators will not get slashed for bad behavior like indexes they are hit with a withdrawal tax if they move their stake off a subgraph this is to make sure that they commit to the network and to find the highest quality subgraphs.

Since choosing a low-quality subgraph means no querying fees and lots of withdrawal taxes indexers delegators and curators also earn rewards from the rebate pool which issues grt to participants who contribute the most to the graph network. Finally, any grt staked by indexers delegators, and curators are subject to a 20-day unlock called the thawing period.

Summary

For the time being, graph is centralized as of now but it has plans to go fully decentralized by the end of next year.

Well gang it seems like all the hype around the graph is justified. Like so many other projects in the crypto space, the graph was inspired by a distaste for the centralized way of doing things noticing the grave dangers of centralized data servers that underpin almost every single application we use today. Three talented individuals decided to create a protocol, a protocol to make it possible to comb through decentralized data effectively thereby supercharging existing dapps and accelerating the speed at which new ones can be built. This is all thanks to the graph explorer which functions as a marketplace for data sets that anyone can contribute to and request information from to ensure fair fees, high-quality data, and low fetching times. The graph has created an elaborate structure of economic incentives involving indexers who find the data delegators who ensure indexers are being effective and affordable and curators who create and vet the data.

After all, the graph main net has only just been released and it has already proven its value and utility with over 3 000 subgraphs half a billion data queries per day, and some of the largest cryptocurrency projects building and improving their protocols using its technologies.

The graph is in the perfect position to continue its growth and its expansion to other cryptocurrency blockchains. Going forward the graph is looking to continue its move towards decentralization by introducing a non-profit foundation and a representative council that will gradually transition the protocol to a dow run by grt token holders regardless of the current or future valuation of the grt token. The importance of what the graph is bringing to the cryptocurrency space cannot be understated serverless data and truly decentralized applications that will conquer their centralized competitors.

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