TL;DR
Band Protocol (BAND) is a cross-chain data oracle platform that takes real-world data and supplies it to on-chain solutions. The protocol itself is built on top of Bandchain - a blockchain designed to be compatible with most smart contracts.
The goal of this protocol is to reduce the data congestion that comes from fetching real-world data. The protocol uses a delegated proof of stake consensus mechanism where delegators, validators, and nodes stake their BAND holdings to participate.
Lastly, any request for on-chain data is gathered by validators who then commit it to the chain and distributed to the requesting DApp.
Introduction
Smart contracts have defined a new we think about decentralized finance. They are significant at immutable storage and verifiable transactions yet they have been restricted from utilizing their full potential due to the lack of access to outside data.
These real-world data sources are located outside the blockchain and must be integrated on-chain. Oracles, like Band Protocol, have made incredible efforts to try and solve this issue.
What Is Band Protocol?
Understanding what Band protocol is trying to solve, helps to understand the problem. Data that smart contracts can’t access includes any real-world data that exists on the traditional web. There have been a multitude of efforts trying to figure out a way to amend this issue but have not been successful for three reasons:
Centralization: the data itself is stored in centralized servers controlled by a centralized authority.
Network Congestion: As a result of extraction data, there could be high network congestion since they are being implemented on the same block. This feeds the 3rd issue:
High Costs: come from developing, researching, and deploying a solution. Further, high network congestions also cause a high amount of network fees to be incurred.
How Does BAND Protocol Work?
The Band Protocol acts as a middle layer operating between smart contract platforms and various data providers. The protocol does three things:
It handles any data requests coming in from decentralized applications.
It queries the data from the various data providers.
It reports the results back to the application.
It is able to achieve this in a decentralized, cost-efficient, and scalable way. As a result of this smart contracts can execute things based on real-world data. Without this, it would be difficult for DApps to operate in a trustless and transparent manner.
BAND Tokenomics and Use Cases
BAND is Bandchain’s native token. It is the token used to incentives validators to produce new blocks and submit data requests. In addition, Bandchain applies an inflationary model on the BAND token in order to incentivize network participation. The annual inflation rate ranges anywhere between 7% to 20%. It is adjusted to target having 66% of the total supply of BAND tokens staked.
To illustrate how they incentivize holders to stake their holdings imagine this scenario. Let's suppose a person decides not to stake. Therefore when new BAND tokens enter circulation, their percentage of holdings decreases with respect to the overall percentage of the token supply. However, if the holder decides to stake then they will receive a token proportional to the inflation, meaning their percentage before and after remain the same.
Further, there are three other ways holders could use this token:
Participate in the governance of the network.
Bond tokens to become a validator.
Delegate tokens to validators and become a delegator.
Band Protocol’s Consensus Mechanism
Band Protocol uses a Delegated Proof-of-Stake consensus mechanism to secure its oracle network. Bond has node operators working on the blockchain, with each node operator staking BAND tokens to disincentivize any malicious behavior. BAND is the official token of the network. The node validators are rewarded with block rewards and query fees as a result of processing data requests.
BAND Validator vs Delegator
If you hold BAND, then there are two ways to participate in the network - as validators or delegators. So what is the difference? Validators in the network process new blocks and transactions and as a result of their effort, they get a portion of the block rewards. Delegators, on the other hand, are those who don’t wish to become validators but want to participate in the network.
Delegators stake their BAND tokens to existing network Validators and share a portion of the rewards earned by those Validators. The amount earned is proportional to the amount stakes onto the Validator
Band’s Protocol Main Features
Band differentiates itself from other solutions out there in 4 ways:
Decentralization: Bandchain protocol is completely decentralized through its global pool of validators and its publicly available data requests flow.
Flexibility: maximum customization and flexibility for the user to query and compute their desired data feed.
Scalability: BandChain is designed explicitly for oracle data request and computation. This is reflected in the benefits it provides.
Cost: allows anyone looking to request data to do so only when they need to and pay the associated fees on a per-request basis.
Final Thoughts
Founded in 2017, Band Protocol provides Oracle solutions geared toward enabling Web 3. Aside from being decentralized, flexible, scalable, and cost-efficient, it has proven to be an attractive option for developers looking to become part of the web3 ecosystem.
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