Opinion: Unleashing the Potential – Four Key Trends Defining the Web3 Data Environment
Disclaimer: The author’s views and opinions expressed in this article are their own and do not necessarily reflect the views and opinions of the editorial team at crypto.news.
As the blockchain ecosystem continues to expand, the amount of data it generates and stores also increases. This presents a significant challenge in terms of storing, querying, and retrieving data in a complex and fragmented landscape. However, the web3 community is rising to these challenges with innovative solutions.
Here are four key trends shaping the web3 data segment and some insights into their potential impact.
1. Solving Ethereum’s scalability trilemma through data availability
Data availability (DA) has emerged as a crucial challenge in solving Ethereum’s scalability trilemma as the community moves towards a rollup-centric ecosystem. Validators rely on blockchain data to validate transactions, but block space on Ethereum is limited. The planned upgrade to proto-danksharding aims to address this issue, but its implementation has been delayed.
To overcome this challenge, modular blockchains like Celestia, Avail, and Eigenlayer DA have emerged. These platforms provide a lower-cost solution for rollups to publish transactions with Ethereum-like security guarantees. However, there is a risk of introducing new vulnerabilities if data is distributed across less-proven blockchains. Platforms will need to demonstrate speed, resilience, and the ability to deliver accurate data to gain trust.
2. The rise of data APIs as alternatives to oracles
Bringing off-chain data onto the blockchain used to be a significant challenge for developers. However, decentralized oracle networks like Chainlink provided a solution by verifying off-chain data through a trustless node network before bringing it on-chain.
Now, decentralized APIs are eliminating the need for a third-party oracle. Services like API3 and Airstack provide access to on- and off-chain data, including transactions, NFT metadata, and social interactions. Each data provider signs submissions on-chain to verify accuracy and authenticity.
These decentralized API solutions offer advantages over traditional oracles, such as transparency, lower costs, and lower latency. As a result, we can expect to see increased competition between decentralized APIs and legacy oracle providers for dapp developers’ attention.
3. Indexers simplify complex blockchain data
The growth of the blockchain data landscape has led to increased complexity. The expansion of dapp development and user activity across platforms like Solana, Polkadot, and Cosmos, along with the introduction of Layer-2 and data availability layers for Ethereum, has fragmented blockchain data.
Furthermore, as web3 finds more use cases, not all data is stored on-chain. For example, decentralized social networks like Farcaster store data in off-chain storage hubs. With the increasing amount of data generated, stored in various locations and layers, and often in non-standard formats, there is a need for reliable indexing services.
The Graph was an early entrant in this market, but projects like Subsquid have emerged to provide a decentralized, multichain data lake and query engine. These solutions offer developers and analysts seamless access to blockchain data across the web3 sphere using different programming languages. Factors like multi-chain support, integration with other decentralized components, speed, accessibility, and cost will differentiate these indexing services.
4. The impact of inscriptions on smaller networks
The launch of Bitcoin Ordinals in February 2023 created a buzz in the blockchain community. Ordinals allow data to be “inscribed” into BTC units, enabling users to create fungible and non-fungible assets. Within a year, over 55 million inscriptions were minted on the Bitcoin blockchain, generating substantial revenue for miners.
However, smaller networks may not experience the same benefits from inscriptions as larger platforms like Ethereum. The law of diminishing returns suggests that the availability of inscription functionality on smaller networks may not attract as much attention beyond the initial hype. Bitcoin’s Block Size Wars are unlikely to be resolved soon, but inscription-based traffic is expected to continue driving miner revenue.
While Ethereum’s scalability and Bitcoin’s utility present challenges for data consumers, they also drive innovation and competition in the web3 ecosystem. This competition benefits dapp developers and users by providing a wider range of choices and advancements in the market.
About the author: Marcel Fohrmann is the co-founder and CFO of Subsquid, a peer-to-peer network. With over seven years of experience in crypto and a strong network in the venture capital and angel investor community, Marcel brings valuable insights to the industry. Subsquid is a distributed query engine and data lake that offers developers access to on-chain data from over 100 chains. It is integrated into a large ecosystem of developer tools, both web2- and web3-native.
