2023 Crypto Watchlist — The Graph
Along with an investment analysis is a background of the cryptocurrency, which may be helpful for new audiences. It’s always good to refresh on fundamentals! Also, this is not financial advice.
The Graph (GRT)
What it is
The Graph is an Ethereum-based protocol for indexing and querying data from blockchains.
It enables developers to create and publish open APIs, called subgraphs, that allow dApps (decentralized applications) to access data from the Ethereum blockchain in a fast and secure manner.
GRT is the native cryptocurrency of The Graph network, and it is used to incentivize the operation of nodes that index and query data from the Ethereum blockchain. The Graph aims to make it easier for developers to build dApps by providing a decentralized and scalable way to access and query data from the Ethereum blockchain.
Ultra Simple Description
The Graph is a way for people to use dApps to interact with a big computer network (a.k.a the Ethereum blockchain).
The Graph helps dApps use information from the Ethereum blockchain by organizing it in a way that is easy to understand and use.
To do this, The Graph uses a group of computers called “nodes” that work together to sort through all the information on the Ethereum blockchain and make it easier for dApps to find the data they need. The people who run these nodes are called “indexers” and “curators,” and they get paid in GRT token for their contribution.
The Graph is a really useful tool because it helps make it easier for people to build and use dApps, which can do all sorts of things like helping people buy and sell things online or track information about different projects. It’s kind of like a big library that helps people find the information they need more quickly and easily.
Analogy
Imagine a hotel that has a lot of different rooms with different types of information in them. The hotel is like the Ethereum blockchain, and the rooms are like the different dApps that people use to interact with it.
Just like how a hotel helps people find the information they need more quickly and easily, The Graph helps people find the information they need on the Ethereum blockchain more quickly and easily. And just like how a hotel uses money to pay its employees, The Graph uses GRT to pay the people who run its nodes for their work. It’s kind of like a hotel directory that helps people find the information they need more quickly and easily, and uses its own type of money to pay its employees for their work.
What it Does & How it’s Used
The Graph enables developers to create and publish open APIs called subgraphs that allow dApps to access data from the Ethereum blockchain in a fast and secure manner. The network of nodes are operated by indexers and curators to index and query this data, and it uses the GRT cryptocurrency to incentivize the operation of these nodes and pay fees for the use of its services.
Subgraphs: These are open APIs that allow dApps (decentralized applications) to access data from the Ethereum blockchain in a fast and secure manner. Subgraphs are created and published by developers, and they can be used by any dApp that needs to access the data they contain.
A subgraph can be thought of as a subset of a larger graph, similar to how a chapter in a book is a subset of the entire book. Just as a chapter in a book focuses on a specific topic or theme and consists of a collection of related pages, a subgraph in a graph consists of a set of vertices (nodes) and edges that are relevant to a particular subject or problem.
Nodes: These are the computers that run the software that powers The Graph. Nodes are operated by indexers and curators, who are responsible for indexing and querying data from the Ethereum blockchain and making it available through the GraphQL API.
Nodes in a graph can be thought of as points or locations in a network, similar to how a city is a location in a network of roads. Just as a city is connected to other cities by roads, nodes in a graph are connected to other nodes by edges.
Indexers: These are the nodes that are responsible for indexing data from the Ethereum blockchain and making it available for querying through the GraphQL API. Indexers are incentivized with GRT, the native cryptocurrency of The Graph, to perform their duties.
Indexers in The Graph can be thought of as librarians who catalog and organize information in a library. Just as a librarian helps users find and access specific books or documents in a library, indexers in The Graph help users find and access specific data in the Ethereum blockchain by indexing and organizing it.
Curators: These are the nodes that are responsible for evaluating the quality and relevance of subgraphs. Curators play a key role in ensuring the integrity and reliability of the data on The Graph, and they are also incentivized with GRT for their work.
Curators in The Graph can be thought of as reviewers or quality control experts who help ensure that the information in a library is accurate and up-to-date. Similarly, curators in The Graph help ensure the quality and accuracy of the data indexed on the network by verifying the integrity of the subgraphs and the indexers that contribute them.
GRT: This is the native cryptocurrency of The Graph network. It is used to incentivize the operation of nodes that index and query data from the Ethereum blockchain, and it is also used to pay fees for the use of The Graph’s services.
Why it’s a Good Investment for 2023
Cryptocurrency and Web3 are distinct, but related, technologies. While cryptocurrency represents a digital form of money that can be exchanged for goods and services, Web3 represents the next evolution of the internet, bringing together blockchain, cryptocurrency, and the innovations of Web1 and Web2 to create new and improved products and services (dApps).
The Graph is an integral part of the Web3 ecosystem, providing a technology that is necessary for efficiently building decentralized applications in a Web3 world. As such, the growth of The Graph can be closely tied to the overall growth of the Web3 market, which can be measured by the increase in development and adoption of dApps. In other words, the growth of The Graph’s Total Addressable Market (TAM) is closely tied to the growth of the Web3 market as a whole.
According to Alchemy, Web3 libraries (kits that software developers use to build) increased in downloads by 178% in 2022 alone. The following chart shows how many downloads of the “Ether.js” and “Web3.js” were downloaded by developers Y/Y since 2018:
A core technology in dApps is the Smart Contract which is also another growth indicator we can look at to see if there’s really growth within Web3.
~118,000 verified smart contracts were deployed in 2022 despite Ethereum’s token price being down over 50% since 2021.
According to DappRadar, there are 12,495 dApps across all chains with at least 1 active user in the last 24 hours, which is up 1200% since 2018 when there were only 1,000 active dApps.
To tie it all together, the amount of dApps being built is increasing at a parabolic rate, and therefore creating a larger and larger potential customer base for The Graph. As the richness of the dApp ecosystem increases, the need for data and data communication increases significantly, which will be fulfilled by The Graph.
Personal Opinions
The Graph is a game-changing protocol that is paving the way for the evolution of web3. In today’s data-driven world, being able to efficiently and scalably query/retrieve data is critical for projects and enterprises of all sizes. The Graph addresses this need by providing a decentralized solution for querying data on the Ethereum blockchain, enabling the development of decentralized applications that can function optimally. With its focus on efficiency and scalability, The Graph is a necessary protocol that is set to play a crucial role in the growth and adoption of web3 technologies. As the demand for data continues to increase, The Graph is well positioned to drive innovation and help shape the future of the decentralized web.
