How to view API3, hailed as a dark horse in the oracle sector?
TechFlow Selected TechFlow Selected
How to view API3, hailed as a dark horse in the oracle sector?
The lightweight integration approach of the API3 protocol, along with its DAO governance models such as API3 Market and OEV Network, has demonstrated broad commercial potential.
Navigating Web3 tides with focused insightsAuthor: Haotian
Recently, DWFlabs leading a $4 million investment in API3 has reignited market discussions about API3's growth potential. Compared to oracle providers like Chainlink and Pyth, API3’s “lightweight” integration approach, along with its DAO-governed models such as API3 Market and OEV Network, reveal broader commercial possibilities. Here’s my take:
1) Simply put, API3 is an oracle connector driven by open-source protocols and incentivized by a DAO economy, directly linking API data providers with DApp smart contract data consumers. Unlike Chainlink’s middleware node network operated by third parties, API3 uses first-party oracles, eliminating the need to trust external intermediaries.
Entering the oracle market through open-source protocol integration means lighter-weight and more customizable solutions. API3’s Airnode allows any node with basic operational capabilities to deploy oracle services in a lightweight manner—especially API providers who own data sources directly feeding raw data to DApp smart contracts via Airnode.
For example, emerging public chains—even their mainnets or testnets—can integrate price data information. To become a data source for Chainlink, API nodes can only passively wait; with the API3 protocol, they can proactively and even custom-build dedicated oracle pricing services. In theory, as long as an API3 node complies with the Airnode protocol’s integration framework and follows the staking governance process of the API3 DAO, it can quickly, cost-effectively, and efficiently join the oracle service network.
If Chainlink and similar oracles gradually favor mid-to-top-tier DApp projects due to brand strength, API3 targets a much broader long-tail DApp market.
Some may argue that the open-source protocol still collects, aggregates, and adapts data, thus should also be considered a "middleware." True—but this intermediary protocol primarily offers standardized, transparent methods and governance rules for integrating into oracle services, which API data providers can actively choose to adopt.
In contrast, third-party oracle middleware networks have their own autonomous nodes and governance mechanisms. They control everything—from what data is selected, how prices are fed to contracts, to handling potential liquidation arbitrage opportunities. There is a fundamental difference between these networks’ focus on “efficiency” and “reliability,” and the open-source protocol’s pursuit of “transparency” and “trustlessness.”
2) API3 Market and OEV Network, built on Polygon CDK, are crucial to reshaping the oracle landscape—essentially bringing the previously hidden “arbitrage pie” within oracle workflows into the open under fair, transparent, and orderly governance rules.
API3 Market aims to offer developers convenient, low-cost data integration services, enabling rapid onboarding onto new networks—an Oracle Stack service providing seamless and user-friendly tooling. This lowers the barrier for both data sources becoming API providers and DApps accessing data, further amplifying API3’s scale effect in the long-tail oracle market.
OEV Network, envisioned as a layer-2 oracle chain, has not yet launched but aims to use a transparent governance system to redistribute the significant profits traditionally captured by oracle data providers through liquidation rights. These gains would instead be returned to users via public auctions and profit-sharing mechanisms.
In my view, this evolution is inevitable in the oracle space and key to transforming the MEV (Maximal Extractable Value) business landscape.
To fully appreciate the significance of breakthroughs like OEV Network, consider Vitalik’s recent remark: “DAO” means project, while “Official” means scam. The purpose of decentralized governance is to distribute hidden profits more fairly—not let them become incentives for individual nodes to foster corruption and disrupt market fairness. Imagine if oracle nodes feeding prices to DApps create liquidation opportunities; privileged nodes and liquidators could collude to extract MEV profits—fairness becomes impossible.
But if liquidation rights are turned into a public auction, the highest bidder earns the next oracle data update right—and thus captures the MEV profit. Then, OEV Network redistributes those profits back to DApp users. Profits extracted from users are returned to them. This way, we preserve API node operators’ incentive to act as liquidators without harming end users—a win-win outcome.
3) From a pure business perspective, API3 has higher ceiling in the oracle赛道. By lowering barriers through open-source protocols and seamless integration tools, any node operator with basic infrastructure can join API3’s decentralized oracle governance network and participate in “mining.” This means AVS (Active Validation Service) node operators in the Ethereum ecosystem—those “enhanced” nodes—can fully integrate into API3’s oracle network, expanding new revenue streams for their AVS networks and reinforcing their underlying restaking economic models.
The logic is straightforward: lightweight integration via open-source protocols naturally unlocks broader commercial potential. Moreover, major competitors like Chainlink and Pyth focus heavily on DeFi financial use cases. While capturing the majority of liquidity from DeFi clients, they simultaneously limit their ability to extend into wider application scenarios—areas where API3 can truly innovate. Beyond DeFi, API3 can play roles in RWA, forex, stocks, futures, smart transportation, healthcare, home automation, and even real-time data delivery and training for large AI models.
In short, building open-source technical protocols and DAO governance frameworks opens up greater commercial imagination. Any domain requiring “trustlessness”—be it oracles, zkVMs, ZK cross-chain bridges—can leverage this model to break through.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Haotian | CryptoInsight
