dAPIs are on-chain data feeds sourced from off-chain first-party oracles owned and operated by API providers themselves.
A dApp is an application that is implemented as a smart contract ands runs on a decentralized blockchain. By the same token, a dAPI can be also described as an on-chain API-like service that is available to dApps. Just as traditional applications use APIs, dApps can use dAPIs.
dAPIs deliver quantifiably secure data feeds from curated sources. Through a dAPI DeFi lenders, synthetic assets, algorithmic stablecoins or derivatives (to name a few) can securely access continuously updated streams of off-chain price reference data on-chain.
dAPIs have been designed to serve dApps with data feeds that are appropriate across the full application development cycle. As such, dAPIs provide products based on multiple use cases. These consist of:
Self-funded data feeds (single-source)
Managed data feeds (multi-source)
Service Coverage (under design and development)
Oracle Extractable Value (under design and development)
Self-funded dAPIs provide developers with the tools to use single-source data feed with no upfront commitment. They are served in a fully permissionless fashion through the API3 Market. Once gas funds have been provided in a sponsor wallet, the dAPI will automatically begin posting data on-chain when price deviation thresholds are met.
Self-funded data feeds are provided as an output of a single first-party oracle that triggers price updates on-chain to a 1% deviation threshold. As such these dAPIs are appropriate for early-stage of dApp development.
To activate an self-funded dAPI, dApp owners must deposit chain-native collateral to a designated dAPI sponsor wallet. This collateral will cover the costs of gas when the dAPI's associated first-party oracle updates the dAPI on-chain.
API3 suggests using a managed dAPI when the single source value of a self-funded dAPI does not provide enough reliability, or the costs associated with topping off the dAPI's associated sponsor wallet is too prohibitive.
Managed dAPIs provide aggregated high-quality price reference data served on-chain by first-party oracles. dAPIs provide DeFi with a secure and transparent solution that can be decentralized according to their requirements.
Compared to self-funded dAPIs, managed dAPIs require authorization through the API3 Market. As such reading an aggregated data feed is permissioned, meaning dApp owners need to register for dAPIs they wish to use. API3 will manage the gas fees (using access fees charged) as part of a portfolio of managed dAPIs.