What is The Graph?

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robertstevens

Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.

Indexing blockchain data is a pain. It’s pretty easy to perform basic searches, like finding out the owner of an NFT or looking up how many coins someone owns, but it’s difficult to perform advanced searches, like mapping out the distribution of a network or sorting for relationships.

You can build a system to do it yourself, but this is expensive and time-consuming, and you’ll have to fix it if it breaks. Blockchains are complicated beasts, after all. Or you could use The Graph, an indexing protocol that corrals information on blockchains—decentralized networks—to make data easy to sift through.

Think of The Graph like a network of decentralized APIs for Web 3.0 projects. APIs let you query any piece of information by scraping public databases. Most websites have them, including Wealthsimple. The Graph lets blockchain protocols automatically query data from other projects, such as Ethereum or the InterPlanetary File System—a decentralized web hosting service.

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The Graph calls these decentralized APIs “subgraphs,” and applications can use these subgraphs via GraphQL, a blockchain querying language produced by The Graph. Subgraphs are stored on IPFS. As of September 2021, several major blockchain projects use The Graph, including decentralized finance networks Sushi, Curve, Synthetic, and RAI. Combined, these protocols manage billions of dollars worth of cryptocurrencies.

Since The Graph is decentralized, it doesn’t provide the indexing power itself, as a Web 2.0 company might do. Instead, The Graph relies on a vast network of decentralized operators to process these queries. These anonymous agents are called indexers, and they process queries by staking GRT tokens and earning more as a reward. Indexers require a powerful computer to do this, but the rewards can be worthwhile for effective indexers.

GRT, also known as The Graph, trades on the Ethereum network as an ERC-20 token. As of September 2021, GRT is the 45th largest token with a market capitalization of $3.1 billion. There are 10 billion GRT tokens.

The Graph checks that indexers are doing their job correctly through something called Proof of Indexing, or POI. This is a way of checking that an indexer is working on the subgraphs that the network has allocated to them. The Graph’s nodes constantly scan Ethereum for new blockchain data, which they then give to indexers to catalogue and sort through.

These subgraphs are created by developers. Anyone can create a subgraph, just like anyone can create an API. Subgraphs are created in a piece of software developed by The Graph called Subgraph Studio. They can be explored in another of The Graph’s products, Graph Explorer, which also lets you interact with the protocol.

Indexers are monitored by another group of computers called delegators. These delegators hand their GRT to indexers to provide them with the means to perform their indexing work. Anyone can delegate funds, and it’s an easy way to take a cut of an indexer’s proceeds without doing much work yourself. Delegators earn extra GRT for handing over their money. The indexer, however, chooses how much GRT delegators can earn.

Think of a delegator like a venture capitalist. Their responsibility is to choose a trustworthy indexer to delegate subgraph indexing work to. If they choose wisely, they’ll receive a lot of GRT for their good work. The amount of GRT delegators receive depends on the efficacy of the indexer and the popularity of the subgraph.

The final group of network operators is called curators. Curators are operators that surf the internet and suggest subgraphs for indexers to work on. Without curators, indexers might be sorting through and cataloguing low-quality data that nobody would use, which would not be profitable for indexers, delegators, or curators.

Curators separate the wheat from the chaff by “signaling,” a process of identifying superior subgraph versions, or the latest version of a good subgraph, and then staking lots of GRT to throw their weight behind their decision.

Indexers can trust the decision of curators. By signaling, curators mint shares in the subgraph and must pay a 2.5% curation tax. Thus, signaling is expensive and would not, one would presume, be done without much forethought. The Graph Network pays out lots of money for curators who find good quality subgraphs, and curators earn a share of the query fees. However, curating is a risky business. This is because the curation share is determined by a bonding curve, which can be volatile.

This entire economy is paid for by consumers—people or smart contracts who spend GRT tokens to process data queries. These queries are very useful for some decentralized finance protocols, which depend on well-sorted data to function. The overview for Sushi’s subgraph, for instance, says that it “listens for events from one or more data sources (Smart Contracts) on the Ethereum Blockchain.” Example queries include total volumes of trades, token symbols, and pair counts.

As of mid-September 2021, or nine months into The Graph Network’s live operations, the network has amassed over 160 indexers, almost 7,000 delegators, and 2,200 curators. Since July, the number of subgraphs grew by more than 2,000%. The number of queries grew by 100x in 2020.

The Graph was founded by Yaniv Tal, Brandon Ramirez and Jannis Pohlmann. Tal and Ramirez worked together at MuleSoft, an API software development company that was bought by Salesforce. The Graph raised $7.5 million from private investors between April 2018 and June 2020. Investors bought about 17% of the supply. A further 6% of GRT’s total supply was sold in public sales.

The Graph supports the blockchains Polkadot, NEAR, Solana, and Celo, as well as Ethereum. This means that subgraphs can be applied to decentralized finance smart contracts that are built on those blockchains, too.

How to buy GRT tokens

These GRT tokens can be earned from indexing, curating, and delegating on the network. But you can also buy GRT tokens outright on cryptocurrency exchanges. These tokens, which trade under the tickers GRT, can be bought on top exchanges, such as Binance, Coinbase, and Huobi. You can also buy GRT tokens on Ethereum-based decentralized exchanges, like Uniswap. Wealthsimple doesn’t currently support GRT.

Binance is the most popular exchange on which to trade GRT tokens: 21.57% of all GRT tokens traded in the last day were bought and sold through Binance’s GRT/USDT pairing. USDT, or USD, is a stablecoin pegged to the value of the US dollar. (Binance is not available in Ontario.) The next most popular pairing is Coinbase’s US dollar pairing, which sucked up 17% of the $191 million in daily trading volume.

The way to buy GRT tokens on cryptocurrency exchanges is the same as buying any other token. To buy on a cryptocurrency exchange, you have to first create an account. Then, submit a valid form of identification, like a passport or ID card, and wait until the exchange has approved you for trading.

Once that’s gone through, choose a token that you’d like to buy GRT with. There’s a reason that USDT is the most popular trade for GRT: Its value is pegged to the US dollar, which gives some traders the peace of mind that their crypto money is stable. On Coinbase, you can buy GRT with actual US dollars.

Assuming you’d like to buy GRT with USDT, you’ll first need to buy USDT. This will require you to deposit a token that trades against USDT. Most tokens do, so you can either deposit cryptocurrencies that trade for USDT from another wallet or exchange, or buy USDT with fiat currencies, like the US dollar. You can do this by wiring money to the exchange, or paying with a debit or credit card.

Once you’ve bought USDT, you’ll then need to sell that USDT for GRT. This is possible on the main exchange site. It’s usually cheaper to trade at the market rate, directly on the order books with other users. Some exchange offer further discounts. Binance, for instance, lets you save money on trading fees if you hold BNB tokens.

Once you’ve received your GRT tokens, you can withdraw them to another wallet, keep them on the exchange or stake them in GRT’s network or any other liquidity pools. Generally, it’s a good idea to take them off cryptocurrency exchanges. This is because exchanges are usually unregulated. They are prone to hacks and scams and often do not have insurance policies in place if they go bust.

The market for individual GRT tokens peaked in February 2020, just as the crypto boom for that year was ramping up. GRT’s all-time high on February 12 was $2.88, but the market collapsed shortly thereafter following numerous trading shocks, including a clampdown on cryptocurrency trading in China.

Last Updated November 1, 2021

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