The Evolution of the Web
During the Pre Web/Internet days, data sources were siloed and were separated from one another. There was no way to access these other than to connect or move the data physically.
And then the internet was born thanks to Tim Berners-Lee.
Web 1.0 represents the nascent stages of the internet. Where websites and content were all static and simply linked together by hyperlinks. There was no organization.
Web 2.0 allowed for more interaction between users. This was the birth of user generated content such as user reviews, wiki articles and social media. However, there was still the central gatekeeper that could do as they wish and organize information how they see fit (which is usually what’s most profitable for them.)
Web 3.0 promises a more decentralized web that restores data ownership as well as its benefits back to its users. It gives users control over their data and also shares the benefits with them.
What is the Band Protocol?
Band Protocol was founded in 2017 to combat common problems such as fake news and lack of accessible and reliable data sources. Band Protocol is an open protocol for organizing, managing and governing data in the Web 3.0 world. Whether you need a reliable source of the exchange price of Bitcoin or just a reliable source of a top 10 restaurants, Band Protocol token curated communities will help you get the data and list that you need.
Band Protocol is like the Reddit for Data Sources. Much like how reddit allows users to upvote articles they like, token holders can vote for reliable data sources using their tokens. Band Protocol connects users that need data with reliable data sources that have been vetted and curated by the community.
Users, such as decentralized applications, get a standard framework and tools for data handling to govern, manage and curate trusted data feeds. This gives decentralized applications and systems more reliable data sources to work with while keeping their promise of decentralization thus allowing more use cases leading to mass adoption.
It allows for a decentralized oracle to decide data sources by placing a system of incentives and punishments to make users of the system act in the whole system’s best interest. Oracles connect the system with data feeds from external sources. Because even though the system itself is decentralized and trustless, it will still have to connect to external systems to get data, especially if it wants to have any real world application.
Problems Being Addressed
The two main problems Band Protocol aims to solve are data availability and data reliability. A system is only as strong as its weakest link, therefore the data that feeds into the system must be trustworthy.
Blockchain is being championed because the immutability and the transparency that it brings. Then came the smart contracts allowing for trustless transactions where you know that you if certain criterias are met, certain actions will automatically be performed. However, both of these are still closed loop system or on-chain. Yes, their decentralization is useful but very limited use case if it can’t interact with the outside world. Once they connect directly to an external source, the system loses its decentralization since that external data source could be compromised by a malicious attacker and thus making it a possible point of failure.
Aside from false data, it is also important that it comes from multiple reliable sources so there will be less tampering. One example would be the recent $250m liquidation on Bitmex. Since Bitmex BTC price was a function of the BTC price of just 3 exchange prices, one user cleared the BTC orderbook on Bitstamp (which had a relatively thin orderbook). With a relatively small capital, they were able to manipulate the price of Bitcoin on Bitmex and thus causing the huge liquidation. The intentions weren’t clear but it shows us how important it is to maintain data integrity.
Band Protocol allows any smart contract to access reliable off-chain and real-world data including price oracle, event feed, identity, and APIs – powering expansive use cases for dApps. Although it starts off on the Ethereum blockchain, it is blockchain agnostic and will be made available to all.
Band Protocol allows dApps to access trusted data synchronously via a universal Query Interface, eliminating the need to rely on off-chain oracle services. This means that there is less friction for data feeds thus increasing its availability.
And as for the reliability of the data, Band Protocol encourages both curators and data providers to provide high-quality, non-fraudulent data by incentivising good behavior and punishing bad ones.
Why Do We Need This? Why Now?
With the rise of decentralized systems and applications, the temptation to manipulate and attack data sources of a system operation can be very strong as it is can be very lucrative. This is the reason why we need to properly incentivize those that guard our data streams to ensure continuous high quality and reliable data sources.
For example, if an external data source provided by an ‘oracle’ controls the data inputs to a smart contract, then it has the ability to determine the response and behavior of that smart contract. Essentially the data source controls that smart contract — if the oracle is compromised then so is the smart contract and all the systems depending on it, creating a significantly weak point in the security and censorship resistance characteristics of blockchains.
In order to make decentralized apps mass adoption ready, they must be able to replicate the tools, systems used by their centralized counterparts. In this case it means proper vetting of data. This will allow developers to build better and more intuitive decentralized applications that users won’t even differentiate from their current counterparts.
Some Use Cases
- Reputation Scoring and Identity Management Systems
- Band Protocol can serve as a platform for different identity services to build and share identity information, ready to be consumed by applications via a simple query interface.
- Decentralized Finance
- Band Protocol provides different DeFi products with reliable and more accurate data streams. It allows for a much larger pool of data sources. Just like in statistics, the bigger the sample set, the better.
- Prediction Markets, Games and Gambling
- By utilizing Band Protocol, dApps can access trusted real-world information that is not controlled by a single source of truth.
How It Works
dApps using Band Protocol “consume data via Band’s public smart contract data points rather than through oracles that are external to the blockchain the dApp is built on”. Band’s data feeds are community-curated data sources, providing a framework for dApp users and developers alike to self moderate, curate and manage the data sources such that they can be trusted and reliable for their intended purposes.
“Most importantly Band does not define how the data is treated, rather it provides the means for a community to collectively decide how it will be used and curated.” Band data interfaces are source and application agnostic, meaning that they can be applied for any purpose that the community curating the data deems fit. Sources can be aggregated using mean, median or mode and can be sourced from multiple sources such as centralized external feeds or aggregated smart contract data.
Band Token Utility
- Provide liquidity to the data governance groups and guarantee token values
- Store the value of all dataset token
- As demand for dataset token increases, Band also increases since it is the collateral used. As the price of Band increases, the network integrity also increases
- Governance for future protocol upgrades
- BAND can be used for proposing and voting on future protocol improvements similar to ZRX and XTZ
- Control dataset quality through curated dataset registry
- Band token will be used as the voting power to protect the registry against bad actors.
Why have Multiple Tokens?
Datasets inside Band Protocol are split into multiple Dataset Governance Groups, each of which utilizes its own unique “dataset” token to stake, curate and govern its dataset through mechanics like Token-Curated Registry or Token-Curated Data-Sources. While the data governance groups are independent and do not share the same token, they are all secured by Band Native Token through the bonding curve mechanism.
Token supply for each dataset token is controlled by a bonding curve which mints and burns tokens. These are used for governing and curating data.
The Bonding curve ensures that dataset token’s price always goes up as the supply increases, and token holders always have an option to ”exit” by selling their dataset tokens to receive back proportional BAND back. The earlier a token holder gets in, the cheaper they get their token for.
- A dataset token holder can propose a change
- It will remain open for voting for a certain amount of time
- If it reaches the quota both in terms of votes casted and yes, then it is approved
Economics and Revenue Generation
- Whenever a user uses the data, the data query must come attached with a fee in terms of the blockchain’s native currency (ETH in the case of Ethereum) with the call. Query fees get split among the dataset’s data providers and token stakers.
- The attached fee currency is then converted to Band using uniswap (causing a constant buy pressure) and then to the dataset token via the bonding curve.
Where Do We Get the Data From?
Token Curated Datasources
Through the DPOS or delegated proof of stake consensus mechanism, token holders vote with their tokens. After data providers apply to supply data to a dataset, token holders stake their tokens and them behind data sources which they believe in. Both data providers and the tokens that are staked for them earn a portion of the query fees that are collected.
It is important to note that data points are valid only if atleast ⅔ of data providers are providing such data. The two initial aggregation methods are using the Median and using the Majority.
Data providers will have to upload their details. This forces them to act in the best interest because it costs them financially and reputationally in case of malicious acts.
Token Curated Registry
It is an on-chain list voted by token holders on which data sources belong to which list. An example would be a list of the best restaurants in the world. Each entry is proportional to the weight of tokens that are backing it up.
Data Governance Portal, token-curated datasources (Testnet): https://app.bandprotocol.com
Band Dataset for dApp integration: https://data.bandprotocol.com/
Bloomberg of Crypto, token-curated registry example: https://coinhatcher.com
Enterprise Use Case
Band Protocol also plans to provide tools for enterprise use case allowing private data sharing between private companies. Since most data are private and sensitive, Band Protocol plans to build Web 3.0 support to allow more fine tuned ways of sharing data privately. Focus will be on identity management, reputation systems, credit scoring and supply chain.
CTO: Sorawit Suriyakarn – C.S. Graduate at M.I.T. and Core Developer at Hudson River Trading Linkedin
Band Protocol has closed its seed funding round of US$3 million led by Sequoia India. Others that participated in the round are Dunamu & Partners (the ones operating the Korean exchange Upbit) and SeaX (their first investment outside of the US).
OPINION (NOT FINANCIAL ADVICE)
- Band Protocol has Sequioa India and Dunamu as lead investors which means they will be a serious player in the on-chain oracle space.
- Of note, Dunamu is Upbit Korea’s parent company. Upbit is a stronger wind for token price action than Binance in most cases. So here you have a case of both Binance and Upbit Listing in close succession.
- Suitable for long term focused token buyers.
- The HARD CAP leans on the medium-big side.
Short Term Prospect (1st month) = LOW RISK
IEO = LOW RISK
Mid Term Prospect (2nd-3rd) = HIGH RISK
Long Term Prospect (4th month onwards) = MEDIUM RISK