Chainlink is one of the most prominent crypto projects that has secured a place among the adults thanks to its technology, which is providing external data to blockchain networks using Oracle technology.

Apparently there is a promising competitor that wants to dislodge Chainlink and take market share.

The startup called API3, a new provider of Oracle technologies, is hoping to carve out a stake and compete with Chainlink.

Last Thursday, the startup API3 announced the closing of a $3 million seed funding round led by Placeholder.

The funding round attracted the participation of “Digital Currency Group” and “CoinFund”.

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The funding round shows that despite Chainlink’s dominance, the Oracle problem is still far from resolved, and there is still a lot of debate about the best way to bring real-world data to decentralized applications.

Oracle technologies give the ability to provide external data to blockchain-based applications, which usually require more information to run more smoothly.

Since most of the code for these applications is executed automatically via smart contracts, it is critical that external data is reliable and tamper-resistant.

In networks like Chainlink, many different users run nodes that collect asset prices and other data from the original source, such as an exchange or data analytics agency.

These users charge a fee to copy the data to prevent it from being tampered with, but in doing so they increase the price of the data and the complexity of the network.

The startup, API3, aims to use API providers, eliminate middlemen, and reduce costs by providing aggregated data directly from first-party data sources.

Heikki Fantinen, founder of API3 to source Detailed as follows:

We will make it possible to take advantage of the reputation of off-chain data providers as collateral, which is only possible with the first-party Oracle that we are proposing.

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This eliminates all security risks of the third-party Oracle node layer and makes the first-party Oracle just as trustworthy as the API that gets its data.

API3 will allow first-party data providers such as stock exchanges and credit reporting agencies to run so-called “airnodes,” applications running on the same cloud hosting platform that hosts their API services.

Airnodes are open source software that transfers data from first-party providers.

The Airnode will be created and maintained by a Decentralized Autonomous Organization (DAO), with stakeholders sharing responsibility for managing and maintaining the API3 framework.

API3 should act as a simple API gateway.

Meaning, the dependence on many third parties will be reduced thanks to API3’s data API to ensure data integrity without using a wide network of intermediaries that provide data verification.

Chris Burnisky, founder of Placeholder, which invested in API3 stated:

While API3 is a new effort, the engineers, builders, and community members behind the network have been following the general purpose oracle problem for cryptocurrency for years.

With this experience comes knowledge about what works and what does not work in current systems.

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For them, it’s not about Oracle but more about APIs, and this distinction makes a huge difference in moving all of the world’s data to the blockchain at a low cost.

In addition to Placeholder, several venture capital firms such as Pantera Capital, Digital Currency Group, Hashed and others have joined the API3 initial funding round.

With high-profile investors around the new startup and helping them fund a new Oracle solution, existing Oracle providers like Chainlink may need to watch their appearance as the competition looks to get fiercer over who will be the preferred external data provider.

Read also:

A simple guide and explanation of the Chainlink project and how it works

Chainlink project acquires technology from a US university to make “Oracle” more private