The Graph

What is The Graph (GRT)?

The Graph is a Web 3.0 platform that makes data accessible and open to anyone, allowing decentralized application (dApp) developers to build better, more complex dApps while avoiding centralized data providers.

DApps are made up of smart contracts, but in order to function, they require data that could be stored on the blockchain but also off-chain. Off-chain data is provided to dApps by Oracle services like Chainlink, but on-chain data is often harder to fetch.

In fact, dApps that require complex on-chain data can take a long time, even hours or days, to fetch more complex data from open source blockchains like Ethereum. This makes them difficult to build and harder still to use.

The Graph targets this very problem. Functioning as a data sorting layer positioned between dApps and the blockchain, The Graph can be used by dApp developers to easily fetch complex as well as simple data.

Thus, The Graph makes existing dApps more efficient and new dApps easier to build, giving developers far more tools to work with. It also reduces developers’ reliance on centralized data providers and all of the risks that it entails.

What’s more, The Graph is based on Web 3.0 principles, creating wide-scale economic opportunity and open competition, with all participants in The Graph protocol receiving fair compensation.

What are Decentralized Applications (dApps)?

Decentralized applications, or dApps, are applications that are built by developers and deployed onto a blockchain. These dApps are not reliant on any centralized entities for hosting or data, taking advantage of a blockchain’s immutability and decentralization.

DApps can be deployed on the blockchain thanks to smart contracts. These smart contracts are enabled by programmable blockchains like Ethereum, and their creation marked a significant development following simpler first-generation blockchains like Bitcoin.

Smart contracts replace trusted third parties when carrying out a deal. Rather than having to deposit money with an escrow, rely on a witness, or engage a lawyer, smart contracts are deployed in the form of open source code that executes an action when predefined conditions are met.

These smart contracts can be read before you engage with them, so you know exactly what the code will do. Not to mention, they are immutable and thus can’t be changed once deployed to the blockchain.

When Was The Graph Launched?

The Graph’s initial whitepaper was written in March 2017, with a second version being published a year later along with the official announcement of The Graph in mid-2018. The Graph completed its ICO (Initial Coin Offering) in October 2020, selling 4% of the 10 billion GRT supply. During the ICO, GRT tokens were sold as preGRT, which were then converted into GRT and unlocked at the mainnet launch. 

These 400 million preGRT ICO tokens were sold at a price of $0.03 each, raising $12 million for the project. Notably, participants in this token sale were allowed to invest a maximum of between $1,000 and $5,000, with their purchase cap determined by their contributions to the community and answers provided on the sale registration form.

The Graph Foundation sold 2% of the GRT supply to indexers and strategic community members, raising $5.2 million at a GRT price of $0.026. This strategic allocation was subject to a one-year lock-up period.

The Graph also received around $7.5 million from investors. These include DTC Capital, Compound, Coinbase Ventures, Digital Currency Group, South Park Commons, Collider, and Stakefish, among others. 34% of GRT’s total supply went to these institutional investors, classed as backers and early backers.

The GRT token began trading on major exchanges in December 2020.

Who are the Founders of The Graph?

The Graph was founded by Yaniv Tal, Brandon Ramirez, and Jannis Pohlmann. The trio have engineering backgrounds and have worked together at several startups.

In fact, Tal, Ramirez, and Pohlmann founded a developer tools startup together and built a custom framework on an immutable database called Datomic.

Having spent much of their careers working on development tools, the trio realized that much of the difficulty of building these tools comes from a reliance on centralized databases.

Most databases are owned and siloed by tech giants like Amazon, Apple, Google, Meta (formerly Facebook), LinkedIn, and Salesforce. This centralization of data puts vast power into the hands of a few and reduces the economic opportunity for many. Not to mention, it also makes it difficult to build apps that require this same data.

This prompted the trio to move into blockchain technology, where they began building dApps on Ethereum. The difficulty of using queries with on-chain data led them to develop an indexing protocol, which turned into The Graph.

How Does The Graph Work?

The need for The Graph stems from the fact that applications, including dApps, use queries to find data in large datasets. These queries include operations like filtering, pagination, sorting, grouping, and joining result sets. Without indexes, running these queries is very slow.

The Graph, which provides an incentivized infrastructure layer that creates and maintains indexes, solves this problem in its capacity as a decentralized query protocol.

The Graph creates datasets called subgraphs that are accessible to users. Subgraphs are a description of specific smart contracts in dApps and the values within them that could be relevant for developers.

Major dApps on Ethereum, like Decentraland and Uniswap, have their own subgraphs. This is possible thanks to the open-source, fully auditable nature of blockchain technology, where nothing on the chain is siloed away.

As per The Graph Explorer, there are currently 444 subgraphs that dApp developers can query.

DApp developers query these subgraphs using GraphQL, The Graph’s own querying language. Nodes, called indexers, search through these subgraphs to find the requested information for the requesting user.

Notably, a copy of every subgraph description is stored on the Interplanetary File System (IPFS), which functions as the data storage layer of Filecoin, a blockchain-based digital storage network.

What Makes The Graph Unique?

Web 3.0 principles dictate that the performance of service must be rewarded fairly. As such, dApp developers using GraphQL to query subgraphs use GRT to pay query fees to indexers.

These indexers provide indexing and query processing services in exchange for these query fees as well as indexing rewards. They also take advantage of a Rebate Pool in proportion to their share of network effort.

Indexers who act maliciously or index incorrectly see their stake of GRT tokens slashed, a mechanism common to proof-of-stake consensus mechanisms that disincentivizes behavior contrary to the protocol.

Curators, meanwhile, review and signal subgraphs that should be indexed by the network, using The Graph Explorer to view network data and make signaling judgments. Indexers rely on these curators, who are paid a share of the query fees generated by the high-quality subgraphs they signal.

Curators stake GRT on subgraphs in order to indicate which ones are high-quality and should be prioritized.

Delegators, meanwhile, select indexers to delegate their GRT to. Indexers can then decide whether to accept these delegations and can use them to earn indexing rewards and query fees, which are split with the delegator. Delegators, however, cannot be slashed if an indexer misbehaves.

Thus, The Graph is able to bring dApp developers into Web 3.0, decentralizing data storage and retrieval in addition to eliminating the need for custom servers and centralized data providers.

How is The Graph Network Secured?

The Graph’s protocol is secured as described above using a form of delegated proof-of-stake where indexers are incentivized for their performance according to the protocol in multiple ways. Naturally, they are disincentivized from misbehavior via slashing.

However, The Graph largely relies on a blockchain-based consensus layer to provide guarantees that mechanisms in the protocol (e.g. payment, voting, and validation) are immutable, irreversible, and permissionless.

Given the founders’ experience with it and the deployment of GRT as an ERC-20 standard token, it may come as no surprise that Ethereum serves as The Graph’s backbone in this regard.

What is the Use of GRT?

GRT, deployed on the Ethereum blockchain as a fungible ERC-20 token, serves as the native token of The Graph.

Its primary usage is twofold: payment for services and staking. Staking is a measure of security for The Graph, with the locking of tokens by various network participants seen as a way of “putting your money where your mouth is.”

Since indexers have to stake GRT in order to start operations and stand a chance of profiting from indexing and query fees, slashing represents a substantial punishment that keeps an indexer in line.

Indexer stakes are also subject to a “thawing period,” where indexers cannot withdraw their tokens for 28 days when unstaking. They can be slashed during this period, meaning that they cannot misbehave and then immediately withdraw their stakes to avoid punishment.

However, better performance as an indexer makes it more likely that delegators will stake to that indexer, meaning a greater overall stake and higher fees earned.

Users of The Graph—dApp developers—also use GRT to pay for the services they receive. These GRT payments are shared between curators and indexers, with the latter splitting their take with any delegators who have staked to them.

As per The Graph Explorer’s network overview, 168 indexers have over 1 billion GRT staked currently, and over 9400 delegators have staked 1.9 billion GRT to them.

Who Controls The Graph?

The Graph’s protocol upgrades and treasury are overseen by The Graph Council, with support from The Graph Foundation, core contributors, and the community. Meanwhile, a decentralized autonomous organization called The Graph AdvocatesDAO oversees the Advocates program and community grants.

The Graph Council is a 6-of-10 multisig that balances the interests of indexers, active token holders, the initial team, technical domain experts, and users. The Graph Council is, however, intended to evolve over time alongside the protocol to decentralize further, and its current state is only temporary.

Future possibilities outlined by The Graph for Council structure include rough consensus similar to that of the IET and Ethereum, or the replacement of existing members with nested multisigs or DAOs.

Currently, The Graph Council includes:

• Users: Sebastian Siemssen (Enzyme Protocol) and Justin J. Moses (Synthetix)
• Indexers: Gary Morris (Staking Facilities) and Jim Cousins (Wavefive)
• Supporters: Spencer Noon (Variant Fund) and Michael Anderson (Framework Ventures)
• Researchers: Santiago Palladino (OpenZeppelin) and Yondon Fu (Livepeer)
• Core Developers: Yaniv Tal and Brandon Ramirez (both Edge & Node)

The Graph Foundation, meanwhile, is mandated to develop and grow The Graph’s ecosystem with a view toward the long-term sustainability of The Graph Network. Notably, The Graph Foundation is legally and financially accountable to The Graph Council.

How Much GRT Is In Circulation?

The Graph has a total supply of 10.5 billion GRT. Out of this, over 6.9 billion GRT are currently in circulation.

23% of the total supply was granted to the early team and advisors of the project, while 8% went to Edge & Node, previously known as Graph Protocol Inc., the company that developed The Graph.

All GRT tokens, aside from those sold at its 2020 ICO, were subject to unlock schedules ranging from 6 months to 10 years. However, the majority were set closer to the 6-month mark, with an emissions schedule increasing GRT supply by 300% in that time frame.

New GRT tokens are issued in the form of indexing rewards, with the rate currently set at 2.95%.

On the other hand, GRT is also subject to burning. A proportion of query fees are burned, as is the deposit tax levied on curators and delegators who withdraw their GRT from the protocol. Rebate rewards unclaimed by indexers are also burned. 20 million GRT has been burned to date.

How Do You Buy GRT?

GRT is an ERC-20 token, meaning that it’s very easy to buy. The Uniswap decentralized exchange and many others like it on Ethereum are reliable places to buy GRT, although it’s listed by several major centralized exchanges, too.

If you’re buying GRT on a centralized exchange like Coinbase, Binance, KuCoin, or FTX, you can use stablecoins like USDT and BUSD to buy The Graph.

That said, it’s also possible to find fiat currency pairs as well as crypto pairs like BTC and ETH.

Is It Possible to Buy GRT Instantly?

How fast you can get your hands on your new GRT tokens very much depends on where you buy them. Purchasing any cryptocurrency on a centralized exchange platform might appear to be the fastest way to do it, but that isn’t the case once you scratch the surface.

Buying crypto on a CEX doesn’t mean you actually own the tokens. For that, you’ll have to withdraw the tokens from the custody of the exchange and into your own wallet. This step can take a while because exchanges tend not to release tokens instantly.

As such, purchasing GRT on a DEX might actually be the fastest option. Once your transaction is entered, it goes onto the blockchain and just needs to be confirmed and finalized. How long that takes depends on the blockchain you’re using.

Transacting on base layer Ethereum can take a few minutes for full transaction finalization, but if you use layer 2, it’s a lot quicker.

How Do You Store GRT?

As mentioned, storing GRT (or any other cryptocurrency) is a serious consideration. Leaving your tokens in the custody of a centralized entity can be a viable option as long as you’re aware of the risks. Even the highest-profile centralized platforms aren’t too big to fail, as evidenced by the likes of Mt. Gox and Celcius.

If you’d rather take custody of your GRT tokens, you’ll need a wallet of your own. Since GRT is an ERC-20 token, any Ethereum-compatible wallet will do. Most wallets come in two forms:

• Cold wallets. Cold wallets keep private keys offline and out of the reach of hackers and other bad actors. They could be in the form of electronic devices not connected to the internet, paper, or some other physical copy of the private key.
• Hot wallets. Unlike cold wallets, these connect to the internet. They could be either desktop clients or online/web wallets that store credentials with the online wallet provider rather than your hardware.

The Graph Energy Consumption

The Graph doesn’t have its own blockchain and therefore can’t really be assessed in terms of energy consumption.

It could be argued that, since it exists on Ethereum, The Graph could account for some of Ethereum’s energy footprint. That said, the Ethereum ecosystem is vast, and there are plenty of other platforms built on Ethereum.

And, unlike projects like Crypto Kitties, The Graph has never taken up the sort of bandwidth that sees it dominate transactions on the blockchain.

Is GRT a Good Investment?

The Graph is an exciting project for many investors because it has a very significant use case and a defined niche. It solves a major problem within the industry, which suggests it isn’t going anywhere.

In fact, the more the service is used, the better it is for the value of the GRT token since the platform users need to buy GRT and use it to pay for The Graph services. Query fee burning is another mechanism that can only help to improve the project’s tokenomics.

However, the token’s initial distribution is a cause for concern, more so with The Graph than with most projects. With only 4% of the GRT supply being issued to the public and vested tokens being unlocked at an aggressive rate, the risk for investors remains extremely high.