GRT

Most recent update: [June 26, 2023]

What is The Graph? 

Like how Google indexes the world wide web, The Graph, powered by its token GRT, is a decentralized protocol that indexes and queries data from blockchains. As it is Ethereum-powered, The Graph is mainly used to index blockchains like Ethereum and IPFS (Filecoin), while also powering many dApps in decentralized finance and the broader Web3 ecosystem.  

As it is an open-sourced protocol, anybody can build and publish APIs, called ‘subgraphs’ within The Graph’s ecosystem, which applications can query using the protocol’s native GraphQL to retrieve data on the blockchain. By making this data easily accessible, The Graph provides DeFi applications like decentralized exchanges all the data they need to operate at maximum efficiency. 

Who created The Graph? 

Founded in 2018 by engineers Yaniv Tal, Brandon Ramirez, and Jannis Pohlmann, The Graph’s team also includes professionals from the Ethereum Foundation, OpenZeppelin, Decentraland, Orchid, and MuleSoft. The three founders have an extensive history dating back nearly 8 years, as Tal and Ramirez studied electrical engineering at the University of South California.  

Their previous ventures included co-founding a developer tools startup which they spent a significant portion of their initial careers working towards optimizing its API stack. They also worked on creating the framework for an immutable database called Datomic, the experience of which they used towards their vision for The Graph: immutable APIs and data access with the GraphQL query language. 

According to Kraken, The Graph raised a total of $19.5 million in token sales since 2019, including $10 million from its October 2020 public sale. During this time, roughly 21% of the initial token supply of 10 billion GRT has been sold to investors including Coinbase Ventures, Digital Currency Group and Multicoin Capital.  

How does it work? 

As mentioned above, The Graph analyzes and gathers data from the blockchain before storing it into indices known as ‘subgraphs,’ which allows any application on the network to send a query to its protocol and immediately receive a response. Queries are posed using GraphQL, which is a widely used language originally created by Facebook for users’ news feeds. 

The Graph utilizes a network of users who provide their services, known as indexers and delegators, who help process the data and pass them to the end-user and applications. The protocol’s native token, GRT, is used to maintain integrity of this network, which users must stake to perform their roles, this also helps them earn fees from the network.  

Technical Characteristics 

To index Ethereum-based data, The Graph utilizes the ‘Subgraph Manifesto,’ which is the description of a subgraph containing data about smart contracts, blockchain events, and so forth. The flow of data from transactions, subgraphs, and the database all follow a particular structure, starting with dApps that add data onto the Ethereum blockchain through smart contracts. All this data contains a record of events and transactions up until the point where they reach finality. 

The first step for aggregating data happens through Graph Nodes, users who scan network blocks and smart contracts for information, filtering out those relevant to a user’s queries. To facilitate this process, the Node identifies each piece of information that answers queries from subgraphs. 

Once the Graph Node extracts information, there are three types of users who contribute to organizing data in its protocol: 

• Curators – Subgraph developers that assess which subgraphs are of high quality and are worthy of indexing by The Graph; notably, curators attach GRT to the subgraphs they think are important. 
• Indexers – Node operators tasked with providing indexing and querying services for the signaled subgraphs; Indexers need to stake GRT to provide these services. 
• Delegators – They delegate GRT to indexers to contribute to running the network without installing a node. 

GraphQL links the blockchain data and the applications that a user wants to feed it to, once the process is finished, the user can view their query results from within the applications. 

Users can refer to the Graph Explorer to browse subgraphs that already exist in the platform, each of these subgraphs has a playground where users can perform queries using GraphQL. Currently, the protocol can support the indexing of data from Ethereum, IPFS, and Proof of Authority networks, with more networks planned to be supported in the future. There are around 2,300 subgraphs already deployed, with developers mainly utilizing them for applications. 

Some of the major applications implementing The Graph include AAVE, Aragon, Balancer, DAOstack, Uniswap, and Synthetix.  

Supply, incentive, and ecosystem 

GRT is an ERC-20 token that is The Graph’s native cryptocurrency, and it derives its value from ensuring the successful execution of smart contracts depending on The Graph’s protocol. The total supply introduced in 2020 was 10 billion GRT; the total supply is set to increase on average around 3% annually, with 1% of tokens to be removed from circulation each year. 

Notably, GRT is the only currency used for network operations, and anyone submitting queries to indexers must stake their GRT as a query fee. Curators earn query fees for the subgraphs they signal, indexers earn a portion of the query fees and rewards from the protocol, and delegators earn part of the indexer fees for lending their GRT; if indexers are caught in a malicious act, like altering data, they are punished by having their staked GRT confiscated. 

Like other cryptocurrency ecosystems that allow their users to participate in network activities, The Graph is also planning to decentralize the management of the network with their own decentralized autonomous organization (DAO), what they plan to call The Graph Council, this will allow stakeholders to participate in key protocol decisions. Like other DAOs, The Graph Council is meant to be the governing body for the technical aspects of the protocol and will also be responsible for how they allocate their GRT tokens. Basic functions for the DAO will include grant and ecosystem funding allocation decisions, protocol upgrades, protocol parameters, and emergency decisions. 

Security 

The Graph is built on an open data layer on top blockchains: Indexers run their own Ethereum archive nodes to run a Graph Node, or they can even use other node operators like Infura or Alchemy. This creates extra layers of security on top of Ethereum’s already robust Proof of Authority framework. 

Risks and Drawbacks 

Like all other ERC-20 tokens, GRT is at the mercy of the Ethereum network’s scalability issues, namely with gas fees. If you are performing transactions or even moving GRT from one wallet to another, be aware that during periods of high transaction volume on the Ethereum network, then you may be incurring gas fees that can often be considerable. Furthermore, GRT’s utility is only available on a handful of platforms, at the moment it is only capable of indexing Ethereum-based data. As the ecosystem is dependent on user-powered nodes, it is not quite fully decentralized yet – this may be a concern for crypto purists. 

Further Reading 

If you would like to learn more about The Graph and its ecosystem, check out these resources: 

The Graph on Kraken: https://www.kraken.com/en-us/learn/what-is-the-graph-grt 

The Graph on Medium: https://medium.com/coinmonks/what-you-need-to-know-about-the-graph-grt-b2c3de67450f 

The Graph on Coinbase: https://www.coinbase.com/price/the-graph 

The Graph on CoinMarketCap: https://coinmarketcap.com/currencies/the-graph/ 

The Graph on Yahoo! Finance: https://finance.yahoo.com/news/graph-083145241.html 

Due Diligence  

Prior to listing The Graph on the VirgoCX Platform, VirgoCX performed due diligence on The Graph and determined that The Graph is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis including reviewing publicly available information on the following:  

• The creation, governance, and location of The Graph and/or its primary development team; 
• The supply, demand, maturity and liquidity of The Graph; and 
• Legal and regulatory risks associated with The Graph.  

Statutory Rights under Securities Legislation 

VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30, 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada, do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.