API services that are intrinsically interoperable with blockchain technology are known as decentralized application programming interfaces (dAPIs). This is an invention of the API3 protocol.
What Is Decentralized API (dAPI)?
APIs are the backbone of the new digital economy, serving as a fundamental component of digital solutions and the focal point of the API Economy. APIs have been centralized for a long time, however, many decentralized platforms use blockchain technology to provide completely decentralized APIs. A great example of it is decentralized apps (dApps) that work on a decentralized system, thanks to dAPIs. While dAPIs are comparable to conventional APIs in terms of functionality, legacy APIs are centralized and not inherently compliant with blockchain technology.
To understand decentralized APIs you have to understand what an API is:
An Application Programming Interface (API) is a well-defined and well-documented mechanism that allows web and mobile apps to communicate with one another by transferring data and services. Online companies can now provide their data and services as marketable service modules through an API, which developers can subsequently incorporate into their apps. This enhances the efficiency of software development in terms of both cost and time. When compared to the days when developers had to design every feature of their program from scratch, it is easy to see why APIs have become the most important building blocks in the digital world.The difference between centralized and decentralized APIs is clearly identifiable.The API gateway in a decentralized system redirects queries to other API endpoints, which may be the backend of an application or a public API of the app’s trading partner. At runtime, the API gateway is in charge of handling the appropriate protocol, security, and data conversions.The data is gathered in a central data store, which is part of the API platform, in a centralized arrangement. Through asynchronous connections, this central data store maintains near real-time bi-directional synchronization with the linked backend applications and business partners. The API queries are sent straight to the central data storage in this situation.
The Oracle Problem
The ”oracle problem” refers to smart contracts’ inability to obtain data that is not already available on the blockchain. This implies that the smart contracts driving these apps are unable to directly access APIs from the blockchain in which the contract is stored owing to the unique consensus-based security assurances gained from employing a decentralized network of nodes as the application platform. A solution is required that allows smart contracts to access API data while maintaining the underlying system’s security assurances to the maximum extent possible without adding new attack surfaces. Decentralized API services solve this problem by managing various data providers as they are blockchain-based. The difference between dAPIs and existing decentralized oracle solutions is that, unlike current solutions, dAPIs include the APIs that underpin the data feed in the context of the solution. In comparison to existing decentralized oracles, which do not regard the data source API in the scope of their solution, this allows them to deliver greater data transparency down to the true data source level.