Managed dAPIs improve oracle security for billions in DeFi value with bridgeless first-party oracles powered by transparent data sources that can be verified on-chain.
API3, a leader in delivering real-world data to the blockchain, announced the launch of managed dAPIs on the API3 Market . Managed dAPIs are multi-source decentralized data feeds that provide DeFi protocols with superior oracle security and transparency compared to other competing solutions. Due to their native-chain aggregated, bridgeless design and transparent, on-chain verifiable first-party data sources, managed dAPIs deliver a security-first alternative to DeFi protocols looking for “push” type oracle data feeds that update on-chain reference values automatically based on pre-set parameters.
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First-party oracle data, verifiable on-chain
Since its inception three years ago, API3 has been on a mission to develop oracles that provide DeFi protocols with better transparency, accuracy and, most importantly, security. To realize this vision, API3 set out to redesign push oracles around their own architecture, powered by the Airnode first-party oracle node. An oracle node is a piece of middleware that is necessary to deliver data from its off-chain source onto the blockchain. First-party oracles stand for oracle nodes operated by the data providers themselves, instead of third-party node operators as middlemen. By drawing cryptographically signed data directly from the source-level provider, first-party oracles inherit the security characteristics of these underlying data sources without further trust assumptions being placed on any third parties. This “straight from the source” design not only makes first-party oracles significantly more secure than their third-party counterparts, but also gives the user complete and on-chain verifiable transparency towards the origin of the data used to secure their protocol TVL (Total Value Locked).
Native-chain aggregation eliminates reliance on risky bridges
Drawing data directly, without any middlemen, from multiple high-quality sources is far from being the only improvement that API3’s managed dAPIs make to the current push oracle paradigm. Instead of bridging the medianized value from a proprietary aggregation chain or doing this data aggregation off-chain, API3’s managed dAPIs aggregate the first-party-originated data directly on the same chain it is being consumed on. This native-chain aggregation means that the process of combining the oracle data from its multiple sources is secured by the cryptography and decentralization of the same chain the consumer dApp relies on, instead of a separate consensus algorithm. Furthermore, the native-chain aggregation process eliminates the need for bridges, which in the past two years have been exploited for over $2.5B USD. This means that API3’s managed dAPI oracle updates are never susceptible to bridge hacks or bridge-related downtime. To provide even further security through decentralization, the dAPI aggregation contract itself is immutable and the only editable parameter; name-to-source mapping, is governed by the API3 DAO. This is in stark contrast to the designs maintained by API3’s largest oracle competitors, which feature entirely upgradeable oracle contracts controlled by opaque centralized companies.
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Managed dAPI benefits in a nutshell:
- Data source transparency: With cryptographically signed data verifiable on-chain, dAPIs provide end-to-end transparency, with data served by highly reputable API providers.
- Native-chain aggregation: Bridges are only needed when smart contracts cannot connect directly to the source of the data. dAPIs eliminate the need for bridges along with their associated risks, further enhancing the security of the data being served on-chain.
- Multi-source aggregation: Aggregated, multi-source data feeds are more reliable sources of data by mitigating downtime and improving the integrity of data by eliminating outliers.
- DAO governed: Decentralized governance removes centralized control over the Web3 data economy and introduces on-chain transparency into how the DeFi oracles are managed.
A paradigm shift for push oracles
“Despite a lot of talk recently around pull oracles which rely on users fetching their own oracle updates for DeFi transactions, the vast majority of DeFi dApps – worth tens of billions in TVL – continue to secure that TVL with automatically updated, push-type oracles. However, perhaps due to their incumbent design, we see innovation within push oracles as having been quite sluggish. Protocols and chains often pay exorbitant fees for solutions that provide limited source transparency or force the protocols to resort to things like creating makeshift conversions of pull oracles into push oracles if the dApp simply wants to read price updates. Considering the aggregate TVL held in these dApps, these issues pose significant risks for DeFi users and quite frankly the entire DeFi ecosystem. It’s this stagnant push oracle paradigm that we aim to disrupt by giving the DeFi dApps an oracle solution in managed dAPIs that provides verifiable transparency, superior decentralization and gas-efficiency without making any security compromises or charging extortive fees. It is for these reasons we strongly believe that managed dAPIs will become a major enabler for the next generation of safer, more transparent DeFi.”
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