The developers of The Graph, which serves as an indexing protocol for “organizing and efficiently accessing” data from blockchains and storage networks, claim that the decentralized finance (DeFi) boom is just the beginning of the massive Web 3.0 innovation that’s about to take place in the coming years.
The Graph team believes it’s just a matter of time before we begin to see even more institutional investors moving into platforms focused on Web 3.0, which is an evolving set of standards (mostly open-source) that aim to support the Internet of the future. The Graph developers have predicted that Web 3.0 platforms will attract the same level of interest from institutions that Bitcoin is getting at the moment.
They noted that the total value locked (TVL) in DeFi contracts surged dramatically from around $600 million in January 2020 to now more than $40 billion (at the time of writing). They also mentioned that the loans outstanding “were up 22x from $150 million to almost $4.5 billion” year-over-year.
While sharing other DeFi industry developments, The Graph noted that monthly DEX (decentralized or non-custodial exchange) volume is “up to $30 billion” (and even more at the time of writing as the industry is growing at an exponential pace).
And there are now more than 230 DeFi-related decentralized applications (dApps), with innovative new initiatives announced every day. The largest initiatives in the space all “boast impressive stats,” The Graph team added.
For instance, the Maker project has issued well over $1.5 billion in DAI (Maker’s stablecoin or currency pegged to real-world assets), Compound has more than $5.8 billion of assets earning interest across nine different markets and Uniswap has handled a total life-time volume of $51.7 billion.
According to The Graph, it’s just a matter of time before we see many more institutions moving into the Web3 sector, “much in the same way as we saw institutional Bitcoin adoption.”
During the past year on The Graph’s hosted service, the platform claims that it “saw this trend play out first hand.” Developers use The Graph to extract data from the blockchain and then make it accessible to Web3 (the “decentralized” Internet) apps.
As we continue to move towards a more decentralized Internet, an “indexing layer” like The Graph will be “a mainstay of the Web3 stack, enabling applications to load quickly and providing a good user experience,” the developers claim. Last year, we saw The Graph’s hosted service usage statistics “explode,” the development team revealed.
The hosted service query volume surged 100x during 2020 from 100 million queries in January 2020 to over 11 billion in January 2021 alone.
The number of subgraphs (open APIs) on The Graph “grew from ~1k Subgraphs in January to over 7k Subgraphs by the end of the year.” While Subgraphs don’t reveal the whole picture of development on the Ethereum (ETH) network, they’re a fairly “good proxy” for overall Web3 development activity.
According to The Graph, this “momentous” growth came “primarily from DeFi, NFT art and collectibles and DAOs, showing the wealth of potential for different verticals to get onboard the decentralized web.”
“Double clicking on DeFi query volumes, it is no surprise that DEXs and AMM strategies, driven by Uniswap, Balancer and Curve, make up the bulk of query volumes in the DeFi vertical, followed by derivatives. The latter is not at all surprising given that in 2021, … expect to see a boom in all manner of DeFi derivative projects from options to futures to synthetic assets.”
As noted by its developers, an indexing layer like The Graph is “here to stay,” as it’s become an important part of the Web 3.0 technology stack. Writing computer code for syncing and indexing blockchain or distributed ledger tech (DLT) platform data is quite costly, time-consuming and error prone and we’ve seen developers “recognize this fact en masse.”
The Graph team further noted:
“The larger trend is that we are at an important juncture in blockchain development where tooling and innovation work hand in hand. By analogy when the Internet was in its infancy 25 years ago, there was a lot of work on software and infrastructure that improved the developer experience.”
For instance, the rise of web service stacks like LAMP were key in lowering overall costs “to the point that small development teams could bring products to market,” The Graph team explained.
“We are at a similar point in blockchain development where higher layers of the stack such as Oracles and indexing are coming together to improve the developer experience.”
“We are at a pivotal juncture in blockchain development on the cusp of a great innovation boom. With the emergence of a blockchain development stack, developers can easily build truly decentralized and serverless applications, something that was not even possible a year ago. The DeFi snowball was the start of the decentralized avalanche.”
Although Ethereum remains dominant (and will most likely maintain its dominance), we’re still moving towards a “multiblockchain” world, The Graph team predicted. They confirmed that other Layer 1 blockchain or DLT networks have realized the need for an indexing layer and they expect “all major Layer 1 blockchains to have such a layer in place before they can be successful.” This will be “especially important once data is spread across multiple blockchains and storage layers,” according to The Graph team.