What is Decentralized API (dAPI)?

A decentralized Application Programming Interface (API) is a digital solution that enables data and service transmission between mobile and web applications. APIs are a crucial part of the digital economy infrastructure.

Decentralized APIs (dAPIs) are developed using blockchain technology. DAPIs are utilized to create decentralized apps (dApps) and platforms that work on decentralized systems.

Digital companies use APIs to provide their services and data as marketable service modules that can then be integrated into apps. The use of APIs helps optimize software development and makes it more efficient.

Many APIs are centralized by design and are referred to as legacy APIs. Centralized APIs are not inherently compliant with blockchain technology, although they otherwise function similarly to dAPIs. The differences between centralized and decentralized APIs related to the API gateway and be easily identified.

An API gateway is a management tool that acts as a reverse proxy. It accepts client requests and returns the fulfilled services. In a decentralized system, the API gateway redirects the client queries to other API endpoints.

These endpoints can be an application’s backend or a public API of the app’s trading partner. The protocol, data conversions, and security measures are handled by the API gateway at runtime.

In a centralized system, all data is gathered in the section of the API platform known as the central data store. The central data store maintains a near real-time bi-directional synchronization with linked backend apps and business partners via asynchronous connections. The API queries are directed to the central data storage.

The Oracle Problem

The oracle problem is a phenomenon of decentralized networks. Smart contracts distributed on blockchain networks are unable to obtain data that is not readily available on the blockchain.

Therefore, smart contracts cannot directly access APIs from the blockchain in which they are stored. This is due to the unique consensus-based security assurances granted by using a decentralized node network as the app platform.

The solution to the oracle problem must allow smart contracts to access API data and simultaneously maintain the security assurances of the system to their full extent without creating new attack surfaces.

This problem can be solved by using decentralized API services to manage various data providers. This solution is viable as they are blockchain-based by design.

Unlike the decentralized application programming interfaces, existing decentralized oracles do not include the data source API as part of their solution. Decentralized APIs can provide a higher degree of data transparency than decentralized oracles, reaching as far as the true data source level.