On-Chain Insurance with Mason Burkhalter

Today on the Fortune Teller podcast, we are talking with Mason Burkhalter, Head of Operations at API3. API3 allows for the creation of trustless applications that interact with Web APIs. Instead of using legacy third-party oracle networks, API3 is moving towards first-party oracle options to provide more security, efficiency, regulatory compliance, and simplicity.

The API3 data feeds are governed by an open DAO of stakeholders, industry experts and project partners. This lets dAPIs to be operated with maximal transparency, minimal trust in centralized operators, and without centralized attack surfaces. API token holders take a direct part in governing the project by staking API3 tokens into the API3 insurance staking contract, granting voting power in the API3 DAO.

Third party oracles are both insecure and expensive. API3 data feeds are not exposed to data tampering and denial of service attacks by middlemen, as API3 does not have third-party node operators. Thus, API3 data feeds reach higher cost-efficiency, with fewer attack surfaces. Source-level decentralization of dAPIs is enabled by Airnode, a fully serverless oracle node to be deployed by any API provider for free, and with little day-to-day management.

API3 provides dAPI users with an on-chain insurance, powered by the API3 token and Kleros’ decentralized courts. API3’s insurance gives dAPI users a quantifiable safety net in the event of a malfunction, and holds the API3 DAO directly responsible for the dAPIs’ security, while it incentivizes a security-first governance approach for dAPIs, along with the API3 project as a whole.

Furthermore, dAPIs can be bridged to any blockchain, being a multi-layer, cross-platform data solution. This allows for smart contracts on various platforms with more accurate access to premium real-world data. This multi-layer, cross-platform approach lets any smart contract platform leverage API3’s ecosystem of dAPIs and data-integration tools by creating a bridge between API3 and the network.

API3 allows for API providers to easily run their own oracle nodes. With this, API providers can provide their data on-chain, without an intermediary, to any decentralized app (dApp) interested in their services. Using a single first-party oracle creates centralization at the API level, and requires the API provider to be trusted.

An oracle network makes the request to multiple independent oracles, reducing their responses to a single answer via predetermined consensus rules implemented as a smart contract. With these, individual malicious oracles cannot manipulate the outcome, creating a level of decentralization and trustlessness. In addition, the oracle network must be governed decentrally as well. Otherwise, a central entity can switch the oracles or APIs used, or replace the aggregator to manipulate the oracle network output.

To learn more about API3, visit:
https://api3.org/
https://www.linkedin.com/company/api3/
https://www.youtube.com/c/API3DAO/featured
https://twitter.com/API3DAO

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The Fortune Teller podcast is a discussion between industry leaders in blockchain and financial technologies. The podcast focuses on the development of blockchain-based financial services and outlines the current state of the industry and future predictions for the adoption of decentralized finance. Go to www.teller.finance/