API3

Most recent update: [June 26, 2023]  

For anyone that has used a computer, there is sure to have been a point in time where they have run across or used an application programming interface – better known as an API – without even knowing it. These APIs are the building blocks of software that we use every day. In cryptocurrency, smart contracts depend on APIs to access dependable data, but like any type of source code they need to be accessible.  

Who is behind API3? 

Originally launching in December 2020, API3 was brought to life by three main people, the first of which being Heikki Vanttinen. He was previously founder and CEO of CLC group, a blockchain lab that developed smart contract solutions, and was also the chief marketing officer at Zippie, a mobile operating system that specialized in blockchain adoption. 

The second key person to the API3 team is Burak Benligiray, who had previously worked at CLC group as the CTO. One of the main projects that CLC group had produced was “Honeycomb,” which was an predecessor to the current integration platform for API3, ChainAPI. 

The third co-founder is Sasa Milic, who is currently a regular lecturer at our resident University of Toronto, teaching core curriculum courses to computer science students. Among her other qualifications include being a software engineer for Facebook and as a data scientist for Gauntlet. 

Characteristics 

As dApps have become more and more common, the main issue for developers has been trying to integrate them with existing technology – blockchains are radically different from traditional technologies and their APIs equally so. Consequentially, these crypto-based APIs have problems communicating with the ones used in data centers and cloud providers, an issue that has been dubbed the “oracle problem.” 

To alleviate this problem, API3 develops fully decentralized APIs (dAPIs) that are compatible with blockchain technology and have eliminated the need of propriety technology or getting access from a third-party organization. These dAPIs are able to bridged to support any blockchain, meaning they can accommodate almost every decentralized network with smart contract capabilities. The icing on the cake is that dAPIs are more secure and cost-efficient than other solutions that utilize middlemen; with first-party technology, they can provide accurate data reliably while protecting API providers from being taking advantage of by third parties. 

The API3 token 

The token that fuels all of these processes is the namesake API3 token. As API3 is built on Ethereum, the API3 token is minted as an ERC-20 token. This currency is used to pay for subscription fees on dApps and also grants providers access to Airnodes. This robust middleware is what makes API3 a reality – Airnodes essentially allow API providers to transform their APIs into dAPIs. These are serverless oracle nodes that can be deployed quickly – within minutes – and do not need regular maintenance, substantially reducing transaction fees in the process. 

Any dApps that use the dAPI network pay a subscription fee in API3 tokens to do so. Flexibility is offered to API providers that utilize Airnode, as they can be paid out in fiat via an API DAO grant should they prefer not to handle crypto. 

Holding API3 tokens also enables community members to participate in the governance of the project by staking their tokens in an API3 insurance staking contract. Not only does the community have a chance to influence the direction of API3 and modify its parameters and features, but they also receive staking rewards and inflationary rewards. This incentivizes members to participate in the network, progressively increasing its value. 

Supply & Security 

The maximum supply of API3 tokens is 100 million tokens; as of March 2022, there are nearly 37 million tokens in circulation according to CoinMarketCap. 15 million of these tokens were distributed among pre-seed and seed investors, with another 20 million reserved for token distribution events during the project’s launch in December 2020. The founders were allocated 30 million tokens, with 10 million of those being distributed to partners and contributors. To ensure the growth of the project, 25 million was allocated towards an ecosystem fund. 

As it is built on Ethereum, API3 and its namesake token are backed by the Ethereum network’s tried and true security. This is achieved through Ethereum’s robust proof-of-stake consensus mechanism.  

Risks and Drawbacks 

Like other Ethereum-based coins, API3 is susceptible to high gas fees as a result of network congestion. Users need to be aware of high-volume transaction periods when conducting trading with API3 or other ERC-20 tokens, and to be prepared to shell out extra – sometimes significantly – to compensate for Ethereum’s gas fees. Also, much like other progressive crypto projects, API3 has fierce competition from other tokens attempting to achieve similar objectives.  

Due Diligence  

Prior to listing API3 on the VirgoCX Platform, VirgoCX performed due diligence on API3 and determined that API3 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 API3 and/or its primary development team; 
• The supply, demand, maturity and liquidity of API3; and 
• Legal and regulatory risks associated with API3.  

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.