Certain services are so vital they are considered utilities—think electricity, water, and other resources that would be hard to live without. Blockchain ecosystems naturally only have access to data stored on their own chain, and the ability to bring off-chain “real-world” data onto the blockchain can be similarly vital. Therefore, some of the most important “utilities” for blockchains are data oracles which bring off-chain data on-chain. These oracles let smart contract-based decentralized applications (dapps) access off-chain information like the prices of assets like currencies and precious metals, the results of events like sports and legal processes, and information from sensors like cameras and satellites.
Perhaps the most well-known data oracle is Chainlink, which has served protocols built on Ethereum since 2017. While Band was founded around the same time, its functional oracle came somewhat later. This has translated into Band controlling a smaller share of oracle service provision in the blockchain space. Still, while Band’s BandChain is a Cosmos-based chain, the project extended its reach to 20 major blockchains by the end of 2022, including the likes of Ethereum and Binance’s BNB chain.
BandChain is maintained by a decentralized network of validators in order to ensure the data it provides from off-chain sources is accurate and up-to-date. These sources include CoinMarketCap, centralized exchanges, securities API services, and more. The BAND token is staked by BandChain validators in order to process transactions and create new blocks on BandChain. In return, validators earn BAND token rewards.
How was Band Protocol developed?
Band Protocol was co-founded in 2017 by a three-man Thai team including Soravis Srinawakoon, Sorawit Suriyakarn, and Paul Nattapatsiri. Srinawakoon serves as CEO and has been named in Forbes’ 30 Under 30, Suriyakarn is Band’s CTO and touts prior experience with Quora and Dropbox, and Nattapatsiri is Band’s CPO.
In 2019, development of the project was fueled by a $3 million funding round led by venture capital group Sequoia India. At that time, Band had not decided on its permanent home in the broader blockchain ecosystem—whether it would be an Ethereum layer 2, Cosmos, or another chain. It raised more funds through private token sales and an initial exchange offering (IEO) on the Binance Launchpad. As Band grew, it solidified its direction as well as its decision to build on Cosmos.
In 2020, Band Protocol 2.0 launched its Cosmos-based BandChain, providing the interconnected Cosmos ecosystem with data oracle services. It also became the first blockchain effort to join OpenAPI—along with traditional tech companies Google, IBM, and others—in a move to standardize how data is communicated on the Internet.
How does Band Protocol work?
Band Protocol is a platform that provides oracle services across multiple blockchains. Its foundation is BandChain, a custom blockchain built using the Cosmos software development kit (SDK). The project additionally provides multiple data products, including the Band Standard Dataset.
BandChain
BandChain provides the infrastructure for decentralized applications (dapps) to 1) request off-chain data, and then 2) to retrieve that data from third party sources and communicate it back to dapps. When a smart contract-based dapp requests data, it uses an oracle script—a piece of code similar to a smart contract itself. An oracle script sends the request to BandChain’s validators, who retrieve the data and return it to the script (in the form of “data reports”) for aggregation and finalization. There is a fee associated with each of these requests paid to validators for their service.
For example, a DeFi protocol may desire to quote an accurate price for ETH. It can use Band Protocol to query multiple sources across the Internet, aggregate the results, and come up with the most accurate price possible. It pays a small fee to BandChain’s validators for using their network.
Band Standard Dataset
The Band Standard Dataset is a collection of commonly requested pricing data for crypto, commodities, and fiat currencies (otherwise called foreign exchange rates, or FX). This dataset is one of Band’s most-used products, as it integrates into decentralized finance (DeFi) protocols while minimizing the cost of gas, offering flexibility, and drawing from a wide range of sources to assure accuracy.
How is the BAND token used?
At the most basic level, BAND is a staking token. BandChain validators stake BAND in order to earn the right to process transactions and add new blocks to the chain. For both of these services, they are rewarded in BAND tokens. Furthermore, BAND holders who are not validators can choose to stake their BAND to validators through a process called delegation. This entitles delegators to a portion of the rewards collected by their chosen validators. Therefore, Band is a Delegated Proof of Stake (DPoS) blockchain. BAND can also be used to pay for data provided by BandChain oracle sources.
Token economics and distribution
New BAND tokens are issued at a rate of between 7% and 20%—this is also called the token’s inflation rate. Tokens are created each time a new block is generated by validators. The rate is automatically adjusted based on how much BAND is actively staked, with a goal of 2/3 of the total supply being staked at any one time.
At launch, there were 100 million BAND tokens available, although this has increased due to the inflationary tokenomics dictated by protocol staking parameters. Of this original total supply, the ecosystem fund was allocated 25.63%, the foundation was allocated 22%, the development team and advisors received 5%, private investors accounted for 15%, and the remaining 12.37% were sold during the BAND public sale.
Conclusion
- Band Protocol is a data oracle based in the Cosmos ecosystem that offers cross-chain solutions.
- BandChain is a Delegated Proof of Stake (DPoS) blockchain that uses a decentralized network of validators to access off-chain data and communicate it to on-chain decentralized applications.
- BandChain’s validators stake the native BAND token in order to create new blocks, validate transactions, and earn rewards for their role in Band Protocol’s data oracle service.