Oracles and API3 (Price Feeds)

About this lesson

In this course lesson, you will learn how oracles play a vital role in bringing offchain data to the blockchain. The data we will be refering to in course is Price Feeds.

Lesson Contents

1. Understanding the API Connectivity Problem

2. Key Components of API3

3. Breakdown of Decentralized APIs (dAPIs) - Price Feeds

Understanding the API Connectivity Problem

Introduction

• Objective: To understand the challenge of integrating off-chain data with blockchain technologies, known as the API Connectivity Problem.
• Background: Explanation of the deterministic nature of blockchain and how it limits direct access to off-chain data.

The Problem Detailed

• Smart Contracts' Limitation: The EVM blockchain cannot access data outside of its own network natively. It has no idea what the dollar value of what Ethereum is or any assets. Being that the blockchain is also deterministic, there is no internal source of randomness.
• Real-World Impact: Scenarios where lack of external data access restricts the capabilities of blockchain applications. For instance, how a smart contract for weather-based crop insurance struggles without real-time weather data or how defi applications get the value of tokens.

API3's Solution

• API3's Role: API3 aims to bridge the gap by allowing decentralized access to off-chain data, enhancing blockchain applications' functionality permissionlessly.

• Benefits: Detailed analysis of the advantages of API3's approach, including increased security, reduced reliance on intermediaries, and enhanced data integrity.

Key Components of API3

APIs in Blockchain

• API3's Approach: API3 facilitates a decentralized approach to integrate these APIs into blockchain environments, enhancing functionality and security using the Airnode infrastructure.

Airnode

• Introduction to Airnode: The Airnode is an architecture created by API3 to be the relay of data offchain bringing it onchain. There are two types of oracles: