What is API3 (API3)?
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🟢 The simple version
Plain English — no jargon. Start here.
API3 takes a fundamentally different approach to oracles — instead of using third-party node operators to relay data (like Chainlink), API3 enables data providers themselves (weather companies, financial data firms, sports APIs) to run "Airnode" software and serve their own data directly on-chain, eliminating the middleman oracle operator.
The "oracle problem" and API3's solution
Standard oracles (Chainlink, Band) use intermediaries: a data provider posts data to an API, a Chainlink node operator reads that API, and submits the data on-chain. This introduces a "man in the middle" — the node operator can manipulate data (by submitting incorrect values) or go offline. The data provider has no control over or responsibility for what reaches the blockchain.
API3's insight: remove the middleman. With "Airnode" (API3's oracle node software), a data provider runs the oracle themselves. A weather data company runs an Airnode and directly publishes its own temperature data on-chain. The data provider is accountable for accuracy — it's their own data, their own reputation on the line. Manipulating it would be self-defeating. This "first-party oracle" model aligns incentives better than third-party operator models.
dAPIs — decentralised APIs
API3's product for DeFi is "dAPIs" (decentralised APIs) — on-chain price feeds powered by multiple first-party Airnodes. A dAPI aggregates data from multiple API providers who each run their own Airnode. This creates a multi-source, first-party oracle feed. DeFi protocols subscribe to dAPIs and receive continuous price updates. API3 DAO manages the dAPI subscription system and takes a fee from protocol subscriptions.
Is API3 legal in India?
Yes. API3 qualifies as a Virtual Digital Asset (VDA) under Indian law. 30% tax on gains and 1% TDS applies. Always consult a tax professional.
🟡 A bit more detail
For when you want to go a little deeper.
OEV — Oracle Extractable Value
API3 introduced a concept unique to their architecture: Oracle Extractable Value (OEV). When oracle price updates cause liquidations in DeFi lending protocols (e.g., an ETH price drop triggers liquidations on Aave), the value extracted from those liquidations is "oracle extractable value." Currently this goes to MEV bots. API3's OEV mechanism proposes that this value be redirected — returned to the protocols that suffered liquidations, or to the DAO. By capturing OEV through API3's oracle infrastructure, protocols can receive a share of the value that their price updates create. This is a clever economic insight that differentiates API3 from competitors.
API3 vs Chainlink vs Pyth
Chainlink: third-party operators, largest ecosystem, most DeFi integrations. Pyth: first-party publishers (exchanges, trading firms) on Solana/multi-chain, pull-based model. API3: first-party operators (the data providers themselves), Ethereum focus, OEV innovation. Pyth and API3 both target the "first-party" thesis but with different implementations — Pyth has gained more traction, particularly on Solana and newer chains, while API3's dAPI model is focused on Ethereum ecosystem.
First-party oracle model requires convincing actual data providers (weather companies, financial data firms) to run Airnodes. This business development challenge is harder than onboarding crypto-native node operators. API3's adoption depends on signing meaningful data providers. Live data: CoinGecko
🟣 The full technical picture
For the technically curious.
Key facts
- Token: API3 (DAO governance + staking)
- Innovation: First-party oracle — data providers run their own Airnode
- Products: Airnode (oracle software) + dAPIs (on-chain data feeds)
- OEV: Oracle Extractable Value capture mechanism — unique to API3
- vs Chainlink: First-party (provider-operated) vs third-party (node operators)
- vs Pyth: Similar first-party thesis; Pyth more adopted on Solana/multi-chain
- DAO: API3 DAO manages dAPI subscriptions and treasury
- Chain: Ethereum (primary) + multi-chain dAPIs
Airnode technical design
Airnode is designed to be "set and forget" for data providers — unlike running a Chainlink node (which requires constant monitoring, transaction signing, and infrastructure management), Airnode is a serverless function deployed to AWS Lambda or similar cloud services. The data provider deploys Airnode once, it runs automatically, reads their own API, and publishes signed data on-chain. There's no ongoing operational burden beyond keeping the cloud function running. This low-friction deployment model is critical for API3's model — convincing non-crypto companies (financial data providers, IoT companies) to run blockchain oracle infrastructure requires making it as simple as possible.