What is the Graph(GRT) ?
Blockchains are good at recording data in an open and decentralized manner. However, searching blockchain for a transaction is not very efficient.
As a result, dApps built on blockchain use central servers for indexing and storing blockchain data. This results in centralization and forces users to trust third party.
The Graph is a decentralized protocol for querying blockchains like Etherium and IPFS. This helps developers to make truly serverless decentralized dApps.
Just like Google indexes, organizes and retrieves online data, Graph does the same to blockchains. Graph is search engine for blockchains.
For example, it is very difficult to find a particular book from a pile of hundreds of books. But the same task becomes simple if the books are organized serially on a bookshelf. Graph organizes blockchain data in a manner that dApps can easily access. Graph acts as a sorting layer between blockchain and dApps.
Origin of Graph
Yaniv Tal, Brandon Ramirez and Jannis Pohlmann founded graph in 2017.
The founders have engineering backgrounds and have worked together for 5-8 years in several startups like MuleSoft building developer tools.
In 2017 they became obsessed with Etherium. However, they found it difficult to make truly decentralized dApps.
They decided to solve the problem by building a decentralized indexing protocol for Etherium and IPFS. They incorporated the company, Graph Protocol, Inc in 2018.
After years, of hard work and research, graph mainet was launched on 17 December, 2020
What problems does it solve ?
dApps need to access blockchain data. Data in blockchain is not indexed, neither organized for fast retrieval. Hence, teams had to develop and operate centralized proprietary indexing servers or depend on expensive data providers for a fast user experience. This required significant engineering and hardware resources.
Graph makes it possible for dApps to access blockchain data without running a central server. Now developers do not have to:
- Build custom indexing servers
- Write complex data queries
Graph improves the reliability of dApp by removing need for a central database – the central point of failure. Rates are determined by market forces of demand and supply.
Graph has finally made it possible to build truly serverless decentralized Apps.
How does it work ?
Blockchain comprises of blocks that contain records of past transactions. To search for a particular transaction, we has to search first block, if we do not find the transaction in first block then second block is searched and so on. This is time-consuming and not an efficient way to search blockchains.
Hence, dApps used central database servers or third party data providers. This was a central point of failure.
Graph aims to solve the problem by creating an ecosystem where:
- Several individuals called indexers index blockchain and run database nodes.
- These indexers compete in an open market for providing services to users.
- Users can choose any of the indexers to access data based on its reputation and query fees.
- Indexers’ funds are slashed if they give incorrect response to a reply.
GRT is the incentive token that governs the behavior of various market participants.
Indexers run graph node that indexes and organizes blockchain data in subgraphs to earn indexing rewards.
Each indexer competes in an open market to offer its services. Users can choose any indexer to serve their query request based on query fees and indexer’s past performance.
Indexers also have to stake a portion of their GRT funds that gets slashed if they provide incorrect query results. This keeps indexers honest.
Users can be web services, middleware or end-users who need to query the blockchain. They choose the best indexer to service their query based on query fees and past performance.
They pay GRT token to indexer for servicing their query.
Indexing a subgraph can take hours to several days. Indexers cannot blindly guess which subgraph to index hoping they will later earn query fees. They need a signal to judge which subgraph to index.
Curators provide that signal. They stake their GRT token on a subgraph that they feel has maximum future potential. In return, they earn a part of query fees.
Early curators that are first to signal receive a larger share of query fees. Hence, they are motivated to find the subgraph that they feel will have the maximum potential.
Curators can be developers who want their subgraph to be indexed or speculators who specialize in finding the subgraphs with the maximum future potential.
Indexers use this signal to decide which subgraph to index.
Curators GRT funds are not slashed if indexer’s provide an incorrect result for user’s query.
However, curators have to pay a deposit tax that disincentivizes poor decision-making. Curators also earn fewer query fees if they choose to curate on a low-quality subgraph, since there will be fewer queries to process.
Delegators give their GRT token on loan to indexers so that they can earn more query fees. In return, indexers share a portion of query fees with delegators.
Delegators choose the best indexer based on following qualities:
- History & reputation
- Share of query fees
- Participation in forums
- Marketing etc.
Delegators do not have to run graph node and their stake cannot be slashed. But they are charged .5% delegation fees and have 28 days lock-in period before they can withdraw their funds. This ensures that they choose a good long term indexer.
Here is a guide for choosing a good indexer:
Graph protocol enforces a limit on how much delegated stake an Indexer can accept for every unit of their own stake. This “delegation capacity” ensures that an Indexer is always putting a minimum amount of their own funds at stake to take part in the network.
Fisherman search graph ecosystem for dishonest indexers. They dispute the quality of data provided by indexers. This keeps indexers in check.
They earn a reward for finding dishonest indexers.
Arbitrators resolve the disputes raised by fishermen. They decide if the response provided by indexer was correct. They are also rewarded for correct judgment.
Graph QL is the query language used by graph protocol. It was developed by Facebook in 2012 and released to public in 2015.
Graph explorer is the visual tool developed by Graph team to explore subgraphs and interact with the protocol.
Check out Graph explorer here.
Subgraph studio is a tool developed by Graph team to help indexers build and publish subgraphs.
Here is a guide for building subgraphs using subgraph studio:
Check out Subgraph studio here.
How the process works ?
Here is how the complete process looks like:
- Developers build a new smart contract and want other applications to access the blockchain data.
- Curators ( developers and users) use their grt tokens to signal the data is worth indexing.
- Indexers index the subgraph and list their services in the open marketplace.
- The consumers search marketplace to find indexers having the data they are interested in.
- Consumer select the best indexer based on quality and price.
- Consumer sends query along with a conditional micro-payment that specifies how much they are willing to pay.
- Indexer processes the query and responds with query result if they accept the offered price. They also give a uniquely attributable attestation to consumer that the response is correct. Consumers can use this attestation to raise dispute if they feel the query result is incorrect.
Presently, graph protocol is being maintained and updated by a single company: Graph Protocol, Inc. However, there are plans in place for decentralizing the governance in near future.
As per plans, Graph council: a decentralized body will govern the graph protocol in the future. Everybody will be able to submit their idea in form of GIP: Graph improvement proposal. Graph council, which has representation from all the stakeholders, will pass or reject GIPs. Passed GIPs will be developed and implemented.
This is how the complete process looks:
As part of the transition, the initial team is changing their name from Graph Protocol, Inc. to Edge & Node.
Graph council governs graph protocol. It is also responsible to issue grants from graph treasury.
Graph council comprises of 10 individuals representing indexers, users, researchers, backers and the initial team.
Graph foundation is responsible to implement decisions passed by Graph council. It is accountable to Graph council. Its mandate includes:
- Distribute grants and fund projects selected by Graph council.
- Coordinate governance process.
- Educate developers
- Build a strong graph community, etc.
There are many companies that provide indexed blockchain data for building dApps. However, all of them run centralized servers and cannot be considered competition to graph.
There are no crypto projects that are building decentralized query solutions like graph.
There is no public roadmap shared by the graph team. However, they are currently working on:
- Decentralize governance: Presently graph is governed by a single company. Graph team is developing Graph council and Graph foundation to make governance more decentralized.
- Graph team currently hosts graph explorer on a central server. They are will migrate it to decentralized storage solution like IPFS.
- Graph will support all the major blockchains like Polkadot, NEAR, Solana, Celo, Bitcoin, Cosmos, Avalanche, Binance smart chain and Flow in the future.
Graph is building core infrastructure that will be used by all dApps in the future. They are first to the market and several dApps have already been built using graph. These dApps will not migrate from graph ecosystem in the future without a strong reason.
All teams want graph to support their blockchains. This will ensure more dApps get built on their blockchain. They extend all the help graph need to develop tools to support their blockchains. This helps graph team to develop tools easily and quickly.
Graph ecosystem has network effects: new dApp will be build using graph if there are already large number of dApps using graph. This will start a chain reaction resulting in explosive growth.
GRT is an ERC 20 token. Graph protocol is built on Ethereum. Ethereum has limited block space, which makes it difficult and expensive to scale.
Graph is trying to solve this problem using state channels.
How much money does graph have for future development ?
Graph has raised:
- 7.5 million dollars by selling 3.4 billion GRT tokens(34 % of initial supply of 10 billion GRT) to seed investors.
- Prior to ICO, graph sold 200 million to indexers and active community members raising 5.2 million dollars
- 400 million GRT were sold in ICO sale raising another 12 million dollars.
Overall graph has raised 25 million dollars.
Remaining GRT tokens have been distributed as follows:
Team, backers and Edge & node company has total of 65% of GRT tokens – which is very greedy. Public has only 4.2%(12% of 35%) of the total GRT tokens: which is very less.
Graph has one of the worst vesting schedule. Majority of the tokens will be dumped in the next few years. This will put immense sell pressure on GRT token: leaving almost no scope for price appreciation.
Graph has annual inflation of 3% which is paid as indexing reward to indexers.
Graph burns 1% of query fees and withdrawal tax paid by curators. This results in deflation of approx 1%.
Hence graph has approximate inflation of 3-1=2%.
Token’s price increase due to demand pressure.
Demand pressure on GRT will come from:
- Indexers: They will buy GRT to stake in graph network.
- Delegators: They will buy GRT to delegate and earn passive income.
- Curators: They will buy GRT to signal a particular subgraph is worth indexing.
- Consumers: They will buy GRT to pay for query fees
- Speculators: They will buy GRT for sole purpose of future price appreciation.
Supply pressure on a token decreases its price.
Sell pressure on GRT will come from:
- Initial investors: Most of them are institutional investors who have already made a handsome profit. They will sell their holdings to lock in the gains.
- Some indexers, delegators and curators will also sell their profits.
DApp will use graph to service query requests. This is certainly a multi-billion dollar market. Currently, market cap of graph is:
Indicators to watch out for
- Google trends: Intrest in dApps is increasing.
- Graph’s Youtube subscriber count and total views are increasing.
- Graph’s Twitter following is increasing.
- Daily query volume is increasing at an exponential rate.
Indicators indicate that graph popularity and network is growing.
Graph is building core infrastructure that will help developers to build truly decentralized dApps. Graph popularity and network is growing. However, I will not be investing in graph because:
- Graph is run by a single company. As per their plans, Graph council will govern graph in the future. Even graph council consists of just 10 members which does not provide sufficient decentralization.
- Greedy token distribution: Team, backers and Edge & node company kept 65% of GRT tokens with themselves.
- Vesting schedule: Majority of the tokens will be dumped in the next few years. This will put immense sell pressure on GRT token: leaving almost no scope for price appreciation.