The Graph (GRT) is a protocol for indexing blockchain data
Different blockchains store transaction and wallet data but cannot exchange it among themselves. Moreover, this data is problematic to systematize due to the peculiarity of its format. In this article, we will discuss a blockchain project that solves this problem and allows not only to retrieve any stored data from decentralized networks, but also to process it efficiently.
What is The Graph?
The Graph is a decentralized protocol that indexes data and queries from other blockchains, such as Ethereum and Filecoin. To put it even more simply, it is effectively the Google of the decentralized world.
Note that The Graph is not a blockchain network in the usual sense - it is a data query protocol built on top of Ethereum like Arbitrum or Polygon. Unlike Bitcoin, Ethereum or BNB Chain tier 1 networks, The Graph does not have its own coin to pay commissions.
The project was founded in 2018 and raised over $69 million in development funding in seven phases. Major investors included Multicoin Capital, Digital Currency Group and Coinbase Ventures, funds known in the crypto industry. The network itself, called The Graph Network, was launched in December 2020.
How does The Graph work, and what problem does it solve?
Every blockchain like Ethereum or BNB Chain stores data, including data from decentralized or Web3 applications like the DEX exchange Uniswap or the NFT marketplace OpenSea.
The problem is that all data from Web3 applications, such as the owner ID of an NFT token or the sum of all wallet transactions, is converted into a language only understood by the Ethereum blockchain. It is possible to read this data itself through special smart contract functions, but more complex queries cannot be obtained in this way: data filtering, sorting, aggregation, and so on.
For example, if you want to know which addresses belong to NFT CtyptoPunks or how many wallets own more than 1 ETH, this information cannot be retrieved directly through the smart contract. A Web3 application would probably need more than one day to get the answer to even one such query from the smart contract. This is because the data in Ethereum and similar blockchains is not indexed, making it very difficult and time-consuming to organize.
Developers of The Graph have unveiled a platform that allows blockchain data to be indexed and queries to be processed efficiently. The platform's network comprises subgraphs that group data from blockchains, thus forming an API stack. If reliable information is needed, a user sends a request to a subgraph, paying for it with native GRT tokens.
Unlike many networks that have only users and validators (or miners), in The Graph blockchain, the roles are slightly different:
- Indexers process requests and act in place of the network's validators;
- Delegators can delegate their tokens to indexers and also receive staking rewards;
- Curators point indexers to subgraphs that provide the most valuable data.
Project Tokenomics
The Graph has a native GRT token of the ERC-20 standard based on the Ethereum platform. GRT is a utilitarian token used for all the main operations in The Graph Network: issuing grants to ecosystem developers, rewarding indexers and delegators for staking, paying subgraphs for processing queries, and so on.
The Graph Network was launched right in the middle of a bullrun in the crypto market, which helped the GRT token to rapidly increase in value in a short time after its release: immediately after listing, the rate was set at $0.12 and in less than 2 months it increased 24 times, reaching an all-time high of $2.88. Since then, the price of GRT token has fallen by more than 95% and is now even lower compared to the rate after listing — about $0.1.
This collapse was largely fuelled by a bear market and growing competition among blockchains. But we can't say that the project is doing badly: GRT's capitalization (the value of all tokens circulating on the market) exceeds $920 million, and by this indicator, it is among the top 50 cryptocurrencies according to the CoinMarketCap monitoring service.
Outlook
The Graph originally ran on Ethereum and could only interact with data from its blockchain. However, the protocol now receives data from over 30 blockchains, including Arbitrum, Polygon, Avalanche, Gnosis, Near and Cosmos.
Each Web3 project can create its own subgraph in The Graph network to efficiently handle user data requests and other decentralized applications. Well-known Web3 applications such as Uniswap, Aave, Sushi, Balancer, ENS Protocol, Curve Finance and many others have their subgraphs.
In the summer of 2023, The Graph migrated from Ethereum to Arbitrum's Layer 2 network, allowing participants to make cheaper and faster transactions without compromising security. The team plans to further develop the protocol's ecosystem by adding new blockchains to process data requests.
