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Summary

SymbolGRTCirculating Supply7,400,273,157
Rank (MCAP)#60Total SupplyInfinite; managed by deflationary mechanisms
Price (03/15/22)US$0.111002Market CapitalizationUS$820,728,674

Complete historical GRT price chart. Source: CoinGecko

In this report, we’ll answer:

What is GRT?

GRT is a decentralized protocol that catalogs and indexes blockchain data. This data includes files, metadata and transaction history.

Developers can access this data to power their applications. This resource frees up valuable development time and resources. With more time and money, developers can focus on making better applications.

For example, suppose you want to find all Bored Ape Yacht Club (BAYC) NFTs with black fur tied to an address. Without GRT and its subgraphs, you’d need to:

GRT aims to provide essential public infrastructure. In a country, roads and bridges are an example of this infrastructure. Businesses don’t need to build the roads and bridges that they use. Instead, they can use this infrastructure while focusing on their mission. 

Similarly, GRT provides simple access to blockchain data. Without GRT, it would be difficult for each application to access this essential data in a secure, cost-effective way.

Many applications use GRT, including Uniswap, Synthetix and Ethereum Name Service. It supports chains based on Ethereum (ETH), NEAR Protocol (NEAR), Cosmos (ATOM) and Arweave (AR).

Subgraphs let applications get data from GRT

GRT revolves around the concept of subgraphs. They provide application programming interfaces (API) that applications use to retrieve information. They’re essential for Web3 development.

Blockchains have properties like finality and chain reorganizations, which make this process even more difficult. Compiling this data is expensive, time-consuming and introduces a security risk.

It’s easier to query a subgraph from GRT to get your information. Anybody can create a subgraph, which tells GRT how to store and return data. 

GRT tokens play a key role in the network’s five major roles

GRT has five major network roles. Each one plays a vital part in the protocol.

Developers create subgraphs. These subgraphs give instructions on how to index blockchain data. They pay a fee in GRT tokens to deploy and upgrade their subgraphs.

Indexers index the data specified by subgraphs. To compile this data, they stake GRT tokens and operate Graph Nodes. They earn from query fees, inflation, and a rebate pool. These rewards incentivize them to provide the best service possible. Otherwise, they receive a slashing penalty.

Curators receive rewards for helping indexers decide which subgraphs to index. To do this, curators deposit GRT tokens into a subgraph’s bonding curve. These deposits give the subgraph a rating used by indexers.

Delegators loan their GRT tokens to indexers. They earn some of the indexer’s rewards but sidestep the technical challenges.

Consumers are usually applications that query information from subgraphs. On GRT’s decentralized service, consumers pay a small fee in GRT for each query.

How data flows in The Graph. Source: About the Graph – The Graph Docs

How are GRT tokens distributed and released?

 The Graph had three funding rounds: 

At launch, it minted 10 billion GRT tokens. These vested tokens distribute to stakeholders over time.

GRT token release schedule. Source: The Graph GRT Token Economics | The Graph Academy

Between 60% and 70% of tokens from the initial distribution are now unlocked. The rate of unlocks decreases as time passes. 

When fewer tokens are unlocking, the price is more likely to rise. Holders of unlocked tokens sometimes sell them on the market, which can push the price down.

Progress of GRT token unlocks. Source: The Graph GRT Token Economics | The Graph Academy

GRT tokens now distribute to indexers as indexing rewards. The protocol targets approximately 3% inflation per year.

There’s no supply cap, but deflationary mechanisms help offset inflation. Tokens burn from query fees, delegation, and curations. Unclaimed rebate rewards and subgraph upgrade taxes also trigger token burns.

As more activity occurs on the network, more tokens burn. This burning reduces inflation and could make the protocol deflationary someday.

Why could GRT be valuable in the future?

GRT solves a critical problem in Web3 development

Thanks to GRT, developers can innovate faster and focus on creating better applications. The public infrastructure built by GRT is essential for most Web3 applications.

The Graph Council helps ensure GRT’s focus on providing essential public infrastructure. It decides how the project will develop. There’s no risk of a business hijacking the protocol to force it to generate more profits.

Without APIs like GRT, a Web3 application’s progress slows or stops. Developing infrastructure like GRT’s introduces security risks. These risks can discourage end-users from using the Web3 application.

GRT also sidesteps issues associated with centralization since it’s decentralized. This decentralization is an attractive ideal in the crypto space. 

Beyond ideals, decentralization also encourages developers to use GRT. Developers are less likely to use a service if it could disappear or become unstable.

GRT’s decentralization offers stability by automatically switching indexers. If one indexer disappears, queries reroute to another indexer. This automatic switching helps eliminate centralized points of failure.

Who’s behind GRT?

The Graph Protocol Incorporation (GPI) launched GRT in the summer of 2018. GPI later changed its name to Edge & Node.

Its co-founders are Jannis Pohlmann, Yaniv Tal and Brandon Ramirez. Before starting GRT, they worked together in software-focused startups.

In 2020, The Graph Foundation was born to support the network. It’s directed by Eva Beylin, who has worked with the OMG Network (OMG) and as a crypto consultant since 2018.

The Graph Council governs GRT’s decentralized network. It balances the interests of GRT stakeholders and holds The Graph Foundation accountable.

Its investors include many notable industry names, including: 

It also benefits from well-known advisors:

The founding team’s experience in software development gives GRT an edge. They designed GRT to be fast and straightforward for developers to begin using. It uses GraphQL, a common language in web development, so developers don’t need to learn a new language.

GRT’s co-founders’ experience and investor backing produced a successful early-stage product that continues to expand. Many companies laid off employees or shut down during the crypto bear market. In contrast, GRT shows growth by continuing to hire.

The Graph continues to expand through hiring. Source: blockwise_matt on Twitter

GRT may benefit from several narratives

The Web3 narrative is gaining traction

GRT provides critical infrastructure for Web3, which is in its early stages. As Web3 grows, GRT may enjoy massive benefits.

Web3 is a term used to describe the next phase of the Web. Blockchain, token-based economics and decentralization play significant roles in Web3. 

Proponents hope Web3 will provide better privacy, security and scalability than Web2. “Big Tech” has a significant influence on Web2. They tend to centralize data and content in a small group of companies. This centralization and loss of consumer control create concern for many.

Web3 wasn’t a widely used term until 2021. Now, the movement is growing fast. Roughly 18,416 active Web3 developers joined Web3’s ranks by December 2021.

Chart depicting active Web3 developers growth over time. Source: Electric Capital Developer Report (2021)

These new developers are a small percentage of the world’s 31.1 million estimated developers. This disparity implies a massive pool of potential new Web3 developers.

Meanwhile, the rate of developers moving to Web3 is accelerating. The count of Web3 developers has nearly doubled since 2020. 

As more developers move to Web3, they will build more applications. These applications need GRT’s features. 

More users increase the demand for GRT tokens. Indexers, delegators, curators and consumers require tokens to help meet new applications’ needs. More demand helps the tokens’ price rise.

ETH may “Purge”, giving GRT another critical use case

GRT offers a way to access historical data from ETH. This ability might make it an essential player in the ETH ecosystem soon.

ETH is facing a problem. The blockchain’s history has grown so large that many hard drives can’t store it. It also slows down blockchain validation, causing decreased performance.

A “Purge” update may take place to solve this problem. It would remove the need for clients to store data over one year old. The update might take place as Portal Network, EIP-4444 or another solution.

Removing excess historical data solves one problem. Yet, some applications still need a way to reference this data. 

GRT allows these applications to query historical information. They need GRT tokens to send these queries. The increased demand helps the token’s price climb.

GRT is growing toward complete decentralization

GRT does offer a free, centralized and hosted service. Yet, the protocol is racing toward total decentralization.

Centralization has always been an ethos for many in the crypto community. Pressure from regulators, company collapses and attacks on centralized infrastructure affirm this ideal.

As GRT becomes more decentralized, it mitigates many of these risks. This security gives it an attractive adoption-boosting edge over its centralized competitors.

What’s next for GRT?

GRT’s full decentralization is around the corner

GRT’s centralized hosting, launched in January 2019, was helpful in its early days. It lets developers test the protocol without paying for queries. This testing helped GRT ensure it aligned with the market and attracted a user base.

Yet, GRT’s end goal has always been decentralization. It recently announced that it would end its centralized hosted service. 

All users will move to its decentralized service by the end of Q1 2023. So far, this decentralized service has been stable and without outages. 

The decentralized service also charges fees for queries. The protocol burns part of these fees, which helps decrease GRT’s supply. This reduced supply makes it easier for the price to rise.

GRT will support more chains

Although it began as a service on ETH, GRT has been adding more chains throughout the years.

It recently announced its Migration Infrastructure Providers (MIPs) program. This program helps new chains join GRT’s decentralized network and migrate multi-chain subgraphs. 

Discord announcement of MIPS program to help new chains join GRT. Source: graphprotocol Discord

Supporting more chains means that GRT can attract more applications. More usage increases the demand for GRT tokens via each of the protocol’s five roles. 

Higher demand for GRT helps drive the token’s price climb. It also increases the amount of GRT burned. These burns decrease token supply, supporting a higher-valued token.

GRT is developing scaling and performance improvements

Parts of GRT will migrate to Arbitrum soon. Arbitrum is an optimistic rollup that supports cheaper, faster and more scalable transactions.

GRT has also announced Shellproofs, which are novel SNARKs (succinct non-interactive arguments of knowledge). They could help reduce proof sizes by 10,000x, which will improve performance.

Another coming feature is substreams. This improvement could increase indexing speeds by 100x.

Having extremely high performance makes GRT more attractive to developers creating applications. Excellent performance helps boost adoption. More adoption increases the odds for the token’s price to surge.

GRT is creating more powerful subgraphs

GRT is developing subgraphs that can use data from other subgraphs. This feature will make subgraphs much more powerful.

This composability could have the same effect on Web3 that smart contracts and “money legos” had on decentralized finance (DeFi). They helped DeFi expand into a useful web of protocols innovating on top of each other.

Suppose GRT finds itself as the base of a blossoming Web3 ecosystem that mimics DeFi’s growth. This paradigm would help the protocol turn into an essential Web3 layer. In turn, this would increase demand and likely the price of GRT tokens.

GRT is working toward minimizing risk from governance

One of the risks of decentralized governance is politicization. The process can devolve into zero-sum games and regulatory capture.

To combat this risk, GRT aims to cut governance’s role over time. Someday, it may disappear. This end would come when features finish and automation handles monetary policy.

Reaching this point would eliminate one of GRT’s risks. Fewer risks make developers more likely to use the protocol, which may help the token’s price to rise.

What is the market saying about GRT?

GRT has a vast social community, showing significant interest in the protocol:

GRT doesn’t have any direct, functioning decentralized competitors. One of the closest competitors may be Covalent (CQT). 

It’s a loose comparison since CQT offers more limited data with worse performance and isn’t real-time. It’s also centralized. 

Still, CQT has 51,700 Twitter followers and 9,736 Discord members. Its subreddit has 1,700 subscribers, and its Telegram has 10,678 members. 

GRT’s community is much larger than CQT’s. This disparity helps reinforce GRT’s dominance and current adoption.

GRT’s social volume during the last 12 months. Source: GRT | Sanbase

GRT’s social volume has decreased since the crypto market’s peak in late 2021. This drop is reasonable to expect. The mainstream has temporarily become less interested in crypto during the bear market.

Still, it maintains a respectable social volume. This social volume will likely trend higher as GRT’s significant releases approach. Web3’s narrative may also create a buzz in the next bull market, drawing attention to GRT and its token.

What are the risks for GRT?

While GRT may see explosive growth in the coming years, every project has its risks.

New competitors could enter the market

Currently, GRT enjoys an undisputed position as the only functioning decentralized indexing protocol.

Still, more competitors could come. Also, some projects might choose to operate their own indexing nodes. Yet, significant downsides discourage this approach for most.

GRT’s head start might make participating in the same niche hard for competitors. It’s operational and serves 27 networks. Large applications such as Uniswap, Bancor and AAVE have already adopted GRT. Competitors need a significant, unknown advantage to lure GRT’s users away.

Every technology has the risk of bugs and hacks

As with any technology, software failure or hackers disrupting the system poses a risk.

GRT audits its code, which helps mitigate this risk. It also offers up to 0.5% of the GRT token supply as a reward for bug bounty hunters. 

Neither the centralized nor decentralized networks have seen severe issues in the years since their launch.

Inflation with no supply cap may add downward price pressure

GRT currently targets yearly inflation in low single-digit percentages. This inflation helps pay indexers.

Suppose all other factors were to stay equal. This constant supply increase could suppress GRT’s price as new tokens sell on the market.

GRT’s deflationary mechanisms help counter this inflation. More adoption increases burning. One day, these burns could surpass inflation and make the protocol deflationary.

Another vital factor is mass adoption’s effect on price. If Web3 follows the path of DeFi, and GRT finds itself an essential service, its use case could skyrocket. This increase would likely far outweigh inflation’s effect on the price.

Bottom line

The Graph has no challengers in its niche as an operating, decentralized API. Its first-mover positioning will likely help it keep its lead. Expansion and development show it’s thriving as other projects die in the bear market.

Its founders’ industry experience and governing bodies helped it deliver a successful product. Some of the most significant blockchain applications already use GRT. 

Meanwhile, Web3 is in its early stages and growing fast. GRT solves a fundamental infrastructure problem for Web3 developers. 

As Web3 expands and more developers use GRT, the token’s price has higher odds of appreciating. Crypto markets will likely see another bull run with accompanying hype. When these two factors converge, the token could reach much higher prices.

What can I do from here?

Who should I follow?

Sources

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