APIs, Blockchain & Cryptocurrency — a trillion-dollar opportunity

Before the Internet, financial trading primarily took place over the phone. If you wanted to buy stocks, for example, you had to call up your broker and have them execute a trade on your behalf. In the post-internet age, the buying and selling of financial securities moved online and the application of technology has advanced the process in many ways. One of those ways has been the creation and use of trading APIs.

What is an API?

API stands for application programming interface. An API is a program that enables one software application to interact with another. In simple terms, an API is a messenger that takes requests and tells a system what you want it to do — and then returns the system’s response back to you.

An example of API use most people would be familiar with would be booking an airline flight on a flight prices comparison website like Expedia. Once you have input your desired departure and destination city, the dates you want to travel and the number of passengers, the comparison site searches through all available airline databases and serves you the options. This is done using APIs provided by each airline.

The same thing occurs when you type your information into a Hotel comparison site like  Hotels Combined or Trivago. The platform requests and serves room rate information from every possible hotel database through their respective APIs.

Another example is the instant cryptocurrency exchange aggregator Swapzone which unites many exchanges through API, providing the best rate offers with the lowest fees to its customers in just one interface. In addition, the service has its own REST API, that allows businesses and individuals to make money on crypto exchanges. By embedding the API into any website or crypto service users can earn a percentage from each transaction and get all Swapzone’s functionality fully available for their clients and users.

How traders use APIs

A trading API, as the name suggests, allows you to interact with a trading system. More specifically, it allows you to execute directly on an exchange. This is particularly useful for traders who run algorithmic models on their own trading systems and want to receive live pricing and be able to execute trades — either manually or automatically through an algorithm — once their model generates a trading signal.

Trading APIs are particularly popular among hedge funds and proprietary trading firms due to their use of algorithmic trading programs, but even private investors can make use of trading APIs provided by online brokerages and more recently by crypto exchanges.

Most leading crypto asset exchanges, such as Bitfinex, Bittrex, and Coinbase Pro, offer trading APIs to their customer base. These APIs enable live pricing feeds as well as direct trade execution.

APIs and crypto trading

APIs have become an integral part of professional crypto traders’ arsenal and are a testament to the evolution of the cryptographic asset trading ecosystem.

The more sophisticated investors enter the crypto asset markets, the more the use of APIs and algorithmic trading will increase. These trading programs, which seek to exploit arbitrage opportunities, for example, will actually help to make the crypto market more liquid and efficient.

The trillion-dollar API opportunity

Just as APIs are integral to the world of financial trading, APIs are also just as essential to the digital world of today. In fact, the world is fast becoming an “API-powered economy” that will be measured in trillions of dollars annually.

RapidAPI, the world’s largest API Marketplace, has over 10,000 APIs and is used by over one million developers. They already process in excess of 1 trillion API calls a year, and their hockey-stick rate of growth is accelerating. A look at the Top 50 Most Popular APIs on RapidAPI (2020) by developer usage provides a snapshot of where APIs are used and why they will continue to be so valuable. That includes the digital economy and the blockchain ecosystem.

In December Band Protocol (BAND) became the first blockchain project to join the OpenAPI Initiative to work towards ensuring a common API standard for blockchain applications.

The OpenAPI Initiative (OAI)

The OpenAPI Initiative is an open-source collaboration project of the Linux Foundation. It was created by a consortium of forward-looking industry experts who recognize the value of standardizing how APIs are described. The OAI is focused on creating, evolving, and promoting a vendor-neutral description format.

The OpenAPI Initiative (OAI) is membership-based with a who’s-who of tech giants. Since 2016 the Technical Steering Committee has been led by major tech players: Ron Ratovsky (SmartBear Software), Darrel Miller (Microsoft), Marsh Gardiner (Google), Jeremy Whitlock (Google), Uri Sarid (Mulesoft), and Mike Ralphson (Mermade Software).

The OpenAPI Specification (OAS) defines a standard, programming language-agnostic interface description for REST APIs, which allows for people and computers to discover and understand the capabilities of a service without requiring access to source code, additional documentation, or inspection of network traffic. When properly defined via OAS, a consumer can understand and interact with the remote service with a minimal amount of implementation logic. Similar to what interface descriptions have done for lower-level programming, the OAS removes the guesswork in calling a service.

OAS is recognized as the most popular open-source framework for defining and creating RESTful APIs, and today tens of thousands of developers are building thousands of open source repos of tools leveraging the OAS.

Band Protocol

Band Protocol is a cross-chain data oracle platform that aggregates and connects real-world data and APIs to smart contracts. While blockchains are optimized for immutable storage and deterministic, verifiable computations, they cannot securely access data available outside the blockchain networks. Band Protocol addresses this issue by enabling smart contract applications such as DeFi, prediction markets, and games to be built on-chain – without relying on the single point of failure of a centralized oracle.

Band Protocol’s decision to join the OpenAPI Initiative (OAI) is a strategic move but it’s also important for the whole blockchain ecosystem.

The membership will enable them to contribute towards the development of a common API standard that will ensure blockchain applications can easily leverage off-chain APIs to better engage with centralized data sources and the wider technology community, enabling expansive use cases of smart contracts.

“Our mission is to define a common API standard for blockchain applications by collaborating with prestigious partners to bridge the gap between centralized data, APIs, and smart contracts on the blockchain,” Soravis Srinawakoon, CEO and Co-Founder of Band Protocol.

OpenAPI Initiative Current Members. Source OpenAPIs.org

Oracles and APIs

Blockchains do not have the built-in capabilities to talk directly to external systems and make API calls. An oracle enables blockchains or smart contracts to interact with external data. As blockchains are deterministic one-way streets, an oracle is a path between off-chain and on-chain events.

Inbound oracles bring off-chain or real-world data to the blockchain. Outbound oracles inform an external entity of an event that occurred on the blockchain.

Inbound oracles: allow data pertaining to real-world events to be called to the blockchain, with use cases ranging from automated trading based on the current price of an asset to gaming dApp payouts in the event of a win. Smart contracts contain the rules, and oracles provide them with the data they need to trigger and execute those rules.

Outbound oracles: work in the opposite direction, informing actors off-chain of events that occurred on-chain, such as smart contracts with the ability to send data to the outside world. An example would be a smart lock in the physical world, which receives payment on its blockchain address and needs to unlock automatically.

Oracles provide the bridge between this trillion-dollar API economy and blockchain. that Band Protocol’s decision to join the OpenAPI Initiative and contribute towards a standardized OpenAPI Specification will benefit the whole blockchain ecosystem and accelerate the rate of innovation and adoption.