API3 (API3)

Overview

API3 is a blockchain oracle project. An oracle brings information from outside a blockchain into a smart contract. That information might be the price of an asset, an exchange rate, or the result of a real-world event. Smart contracts can then use it to carry out tasks automatically.

API3’s main idea is first-party data delivery. A data provider operates the oracle that publishes its own information, rather than handing the data to an unrelated operator to relay. API3 combines these sources into feeds that applications can read on supported blockchains. Its token, also called API3, gives holders a role in governing the project. API3 also offers a way for applications to receive part of the value created when oracle updates enable certain transactions. (old-docs.api3.org)

Why outside data matters

A lending contract can hold collateral and enforce repayment rules, but it needs an outside price feed to know what that collateral is worth. The same need appears in other applications that respond to changing conditions. API3 focuses on making that flow of information direct, verifiable, and useful to the applications that depend on it. (old-docs.api3.org)

History & Team

API3’s original white paper was published in 2020 under the names Burak Benligiray, Saša Milić, and Heikki Vänttinen. It set out a plan for decentralized APIs, or dAPIs: data feeds built from oracles operated by the data providers themselves. The project later put its DAO and token-staking system into operation on Ethereum. A DAO is a group that uses shared voting rules to make decisions about a project. (old-docs.api3.org)

Early backing and development

In November 2020, API3 announced a $3 million seed round led by Placeholder, with Pantera Capital, Accomplice, CoinFund, Digital Currency Group, and Hashed taking part. The round allocated 10 million tokens, equal to 10% of the original 100 million-token supply. API3 later announced a separate treasury funding round led by DWF Labs, with participation from Spartan Group, Laser Digital, and Caladan. That later round was linked to work on its oracle products and OEV Network. (medium.com)

Technology & How It Works

First-party oracles and dAPIs

API3 uses software called Airnode to connect a provider’s web API to blockchain applications. A web API is a standard way for software to request information from another service. An Airnode feed obtains data from its provider and signs it with a cryptographic key. The signature gives a smart contract a way to verify which provider supplied the value. (docs.api3.org)

API3 calls an individual signed source a beacon. A feed can combine several beacons into a beacon set, creating a dAPI with multiple sources. This matters because an application can read one on-chain feed while drawing on information from more than one provider. API3’s documentation describes Airseeker as a component that watches the off-chain and on-chain values and triggers updates when the feed’s settings call for one. (docs.api3.org)

The result is an on-chain value that a smart contract can read. A lending application, for example, can compare that value with a borrower’s collateral and apply its lending rules. API3 Market gives developers a catalog of feeds and a way to select a plan for the data they need. The system supports applications on multiple Ethereum-compatible networks. (docs.api3.org)

Oracle extractable value

Some price updates create an opportunity to act immediately. If a lending position becomes eligible for liquidation after an update, searchers may compete to carry out that transaction. API3 calls the value tied to such oracle updates oracle extractable value, or OEV.

API3’s OEV system lets searchers bid for access to certain update opportunities. An application using the relevant feed can receive a share of the resulting revenue. API3’s documentation describes an arrangement in which 80% goes to the partner application and the rest is retained as a protocol fee. These rewards are paid in the native currency of the application’s blockchain. (docs.api3.org)

Tokenomics & Utility

API3 is an ERC-20 token on Ethereum. Its clearest roles are governance and staking. Holders can stake tokens in the DAO’s pool to gain voting power, either voting directly or delegating that power. The DAO can make decisions about matters such as project funding and staking rules. API3’s staking design also pays rewards according to parameters that governance can change. (blog.api3.org)

Original distribution

The original allocation set aside 30% for the founding team, 25% for an ecosystem fund, 20% for public distribution, 10% for seed investors, 10% for partners and contributors, and 5% for pre-seed investors. Those figures describe the starting distribution of 100 million tokens. Staking rewards are part of the token’s economic design, so the original allocation and the supply at a later date describe different things. (tokenomist.ai)

The token’s role is distinct from paying for every data feed. Developers can buy feed plans through API3 Market, and API3 has described managed-feed payments in a network’s native currency. OEV rewards to applications are also paid in native network currency. The API3 token chiefly connects holders to the DAO’s decisions and staking system. (docs.api3.org)

Ecosystem & Use Cases

Applications that need prices

Lending is a direct use case for API3. A lending contract needs asset values to decide how much someone may borrow and when a position can be liquidated. Other decentralized finance applications can use feeds when their contracts depend on an outside value. API3 Market includes feeds for categories such as cryptocurrencies, stablecoins, and liquid-staking tokens. (old-docs.api3.org)

API3 has deployed its oracle stack across a range of Ethereum-compatible networks. Its announced integrations include Ronin, Unichain, Soneium, and Berachain. These deployments give developers on different chains access to the project’s first-party feed design without requiring each application to build its own system for gathering outside data. (blog.api3.org)

Uses for OEV

OEV is most relevant where an update can trigger a valuable action, especially a liquidation. API3 has described OEV-backed lending markets built on Morpho and curated by Yearn Finance. In that model, proceeds linked to liquidation activity can be directed toward participants in the lending market. It shows how an oracle can affect both a contract’s information and the way value around that information is shared. (blog.api3.org)

Advantages & Challenges

API3’s first-party model makes the source of a signed value easier to trace. Combining multiple providers in a dAPI adds another design feature for applications that want more than a single source. API3 Market also gives developers a standard path to find and integrate feeds, while OEV offers participating applications a way to receive value linked to certain updates. (docs.api3.org)

Practical limits of the design

Running this model across many assets and chains takes work. Useful feeds depend on willing data providers, appropriate update settings, and support on the chains where developers build. Applications also have different needs for how often a value changes and how quickly a new value must appear on-chain. API3’s OEV design adds another consideration: its base feeds use a short delay so that selected searchers can act on OEV updates first. Developers must weigh those features against the needs of their own contracts. (docs.api3.org)

Where to Buy & Wallets

API3 can be purchased on Coinbase, Kraken, and Binance, subject to each platform’s regional availability. It can be held on an exchange or transferred to a wallet that supports Ethereum ERC-20 tokens. MetaMask supports ERC-20 tokens and lets holders add a token by contract address when it does not appear automatically. Ethereum transactions involving API3 use ETH for network fees. (coinbase.com)

Using the token with the DAO

A self-custody wallet gives a holder the ability to connect to Ethereum applications, including the API3 DAO’s staking system. Staking is the step that links tokens to the DAO’s voting process; simply holding API3 in a wallet is a separate activity. (blog.api3.org)

Regulatory & Compliance

API3’s use as a governance token does not create one legal classification that applies everywhere. In the United States, the Securities and Exchange Commission’s 2026 guidance explains that the treatment of crypto-asset transactions depends on their facts, including whether an offer or sale involves an investment contract. In the European Union, the Markets in Crypto-Assets Regulation sets rules for businesses that provide services such as crypto-asset trading and custody. Those rules shape how platforms offer access to tokens, while applying at the level of the relevant activity and service provider. (sec.gov)

Shariah screening

Sharlife lists API3 with a Shariah-compliant status based on its screening. Its published breakdown passes the project’s purpose, token utility, and staking method. This is a Shariah screening of the asset and its described activities, separate from the legal rules that govern exchanges and token transactions in each jurisdiction. (sharlife.my)

Future Outlook

API3’s direction centers on expanding first-party feeds and making them useful across more applications and networks. Its OEV work adds a second goal: giving applications a way to benefit when oracle updates create valuable transaction opportunities. The project’s continued development will be shaped by data-provider participation, developer demand, DAO decisions, and how well its feeds meet the needs of each application. (docs.api3.org)

Summary

API3 connects outside data to smart contracts through feeds built from provider-operated oracles. Its token supports DAO governance and staking, while its oracle stack serves developers who need on-chain data. Together with its OEV system, these features make API3 an effort to improve how blockchain applications receive information and share the value created around it. (docs.api3.org)