Band Protocol has been around in the crypto space for some years now. It is a cross-chain decentralized oracle platform that allows smart contracts to integrate with any external data source or API in a scalable format. In this report, we lay emphasis on how the project works, its problem solving capacity and review the pros and cons.
The CMP is $7.95 as of 24th September 2021.
What is Band Protocol ?
Band Protocol is a cross-chain data oracle that aggregates and connects real-world data and APIs to smart contracts. So what is an Oracle, one may ask. A cross-chain is nothing but, the capacity of two relatively independent blockchains to communicate with one another and blockchain oracle is a third-party service that provides smart contracts with information from the outside world.
The protocol is built on top of BandChain, a Cosmos-SDK based blockchain designed to be compatible with most smart contract and blockchain development frameworks. So essentially, Band Protocol enables smart contract applications such as DeFi, prediction markets and games to be built on-chain without relying on the single point failure of a centralized oracle.
Why BAND matters and its problem solving capabilities
Before we interpret the fundamentals of the Band protocol, lets us try to understand the so called “Oracle problem” in the blockchain space. The oracle problem is mainly concerned with a very simple limitation that blockchain cannot fetch in data or push out data to and from any external system as an inherent functionality. As a matter of fact, blockchains are isolated networks, similar to a computer with no Internet connection.
To further simply it, we know that Smart contracts are great at providing fixed storage and verifiable transactions due to its deterministic nature. However, their use cases have previously been limited due to the lack of access to information in the real world.
For example, in order to create a decentralized lending protocol on blockchain, the smart contract needs access to the asset prices in order to calculate the security/insurance required for the position to stay healthy. Since most of the trading activities happen off-chain on the centralized exchanges, smart contracts cannot acquire the trading price information without a 3rd party tool to relay them into the blockchain. Without such data, it may not be possible to ensure that all the funds are safe, and the borrowers won’t lose money using the protocol. Oracle solutions such as Band Protocol act as a middleware structure, operating between the decentralized applications and various data sources. It ensures that smart contracts have access to APIs and data sources outside of the blockchains.
Fundamentals of Band Protocol
A lot of terminology in the fundamentals of Oracle solutions is very technical and for the Band protocol it is no different. Let us try to make it as easy to understand as possible.
When a person wants to request data from the Band Protocol, they submit a smart contract to the BandChain containing the details of what data they want and how they want it to be aggregated. Validators are then pseudo-randomly selected based on varying degrees of importance of their respective stake to provide the data.
This is done by getting the data from the sources specified by the smart contract and aggregating the data in the manner specified by the smart contract. This data is then stored on the BandChain and is readily available for other requestors, if any.
If this is still difficult to understand, imagine ordering at a restaurant. You place an order (smart contract) for a pizza (data) and specify in the order that you want ketchup on one bun and mayo on the other bun (the specific way you want the data added together).
Cooks (validators) are “randomly” selected based on how well they can prepare a pizza (probably the best cook is in the washroom, so they choose the second-best burger cook instead). After paying for your order (in BAND tokens) you receive your custom made pizza (data).
In contrast to restaurants, this process takes 3-6 seconds from start to finish on the BandChain and costs less than 1 USD
Band Protocol was developed with the vision to build an oracle infrastructure that supports multiple blockchain platforms while expanding the applicability of smart contracts. The project helps to connect public blockchains with off-chain information, with the following design criteria:
- Speed and scalability: The system must be able to accommodate a large number of data requests for multiple public block chains with minimal latency.
- Crosschain compatibility: The system can serve data for all available public blockchains.
- Flexible data provision: Supports a variety of ways to retrieve and aggregate data.
a) Decentralized Standard Price Reference
Soravis Srinawakoon, one of the co-founders said that, “with the next major upgrade of our Standard Dataset, we will be adding a new mechanism that will allow anyone to send price update transactions to our oracle contract themselves, all secured and verified by our lite client verification architecture and a challenge mechanism”.
b) Cross Chain communication
Oracles such as Band will not only be useful within the context of a single destination chain, but also will a core infrastructure in relaying information and facilitating communication between two independent chains. This can be in the form of verifying token transfer transactions when bridging assets across chain, relaying transaction between chain, and any other arbitrary number of data or actions that needs to be transferred across networks.
Band Protocol vs ChainLink
Why does Band protocol sound so much like ChainLink ? That is because ChainLink is the one of the single largest direct competitor to Band Protocol. ChainLink is currently the most popular oracle in the crypto space by a long shot.
Some of Band Protocol’s features are best appreciated and understood when compared and contrasted to those of its closest competitors in the Oracle space like Chainlink, API3, Umbrella network etc.
Team, Media & Community strength
The Band Protocol was initiated in 2017 by co-founders – Soravis Srinawakoon, Sorawit Suriyakarn and Paul Nattapatsiri
Their media presence doesn’t seem to be significant however with over 100K Twitter followers and over 25K Telegram members, their community is growing at a rapid rate.
As mentioned earlier, Band Protocol’s multifaceted capability makes it potentially useful to a wide array of Dapps. Soravis Srinawakoon, aptly describes the oracle problem as being worth “billions of dollars” and arguably just as valuable to Dapps as the blockchains which run them. Oracles like Band Protocol are quite literally the ‘internet connection’ which make “world computer” blockchains like Ethereum useable and valuable.
- Widespread usage across different growing ecosystems like Luna, Cosmos etc.
- Low fees for data requests that may eventually favour start-ups.
- Interoperable architecture
- Nota as recognised or popular as Chainlink
- Uses random selection for data oracle nodes
- Not enough headway with large DeFi apps
As different options emerge, offering less congestion and other potential technical utilities, Band Protocol may benefit from its “jack of all trades” design, by working across multiple blockchains and relying on community data sources.
MintingM rating for Band Protocol: 3.75/5