WHITE PAPER
  • Abstract
  • Introduction
  • API Connectivity Problem
    • 1.1 Oracle problem: A source-agnostic misinterpretation
    • 1.2 Decentralized APIs
  • Issues with Third-Party Oracles as Middlemen
  • Airnode: A Node Designed for First-Party Oracles
    • 1.1Benefits of disintermediation
      • Off-chain signing of data
    • 1.2 Barriers to API providers operating oracles
    • 1.3 Airnode features
    • 1.4 Airnode protocol
    • 1.5 API integrations
  • Decentralizing Governance through Tokenomics
    • Centralized oracle network governance
    • Management of funds
    • OracleMesh DAO
    • dAPI monetization and API provider compensation
    • OM3 tokenomics
  • Conclusion
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  1. Airnode: A Node Designed for First-Party Oracles

1.2 Barriers to API providers operating oracles

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Last updated 1 year ago

During our work on Honeycomb API Marketplace in the past two years, we communicated with API providers extensively and observed the following barriers to oracle onboarding and operation:

  1. Traditional API providers are typically not more familiar with blockchain tech- nologies than the general public. This applies even for the ones that curate

cryptocurrency market data—as their main operation is collecting data from exchange APIs, processing them, and serving the result through their own APIs—which does not require any blockchain-specific know-how. Therefore, they typically cannot readily operate an oracle node with in-house resources.

  1. There is no job market for oracle node operators. Even if some API providers were to obtain the specific know-how needed by hiring the few node operators that are available, this would not be a scalable solution.

  2. Operating an oracle node consumes a lot of resources in the form of man- hours and infrastructure costs. Unless one is guaranteed significant subsidies or future profits, operating an oracle node is financially infeasible.

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

Airnode is designed to be deployed once by the API provider, then not require any further maintenance.