What is Band Protocol? Decentralized Off-chain Data Platform

Introduction

The software program known as Band Protocol was developed to enable network users to supply reliable data to decentralized applications (dApps) running on blockchains. For instance, a dApp developer would have to be able to estimate the future price of gold if they want to allow their users to place stakes on its future price. Band Protocol offers this service through a piece of software that rewards a particular group of its users known as validators to supply and check external data in order to guarantee the accurate execution of its smart contracts.

In this approach, blockchains like Chainlink and Band Protocol, which both reward user-provided verified data, are referred to as “decentralized oracle” systems. To transmit data across several blockchains, including those based on Cosmos, the Band protocol constructed its blockchain utilizing Cosmos technology. However, before the migration, the protocol first operated on Ethereum.

Understanding the Band Protocol Framework

Band protocol provides a framework for decentralized apps (dApps) to access external solutions by utilizing their smart contract datasets. Thus, relying on its native blockchain, which was originally introduced on the Ethereum network but currently functions with Cosmos’s Inter-Blockchain Communication Protocol.

Band Protocol avoids the need for intermediaries and the problems of sustainability and secure data during connection. The protocol uses a Delegated Proof-of-Stake consensus mechanism to enable its security system.

History of Band Protocol

Band Protocol was developed in Thailand by three founders: Soravis Srinawakoon, the company’s chief executive officer, Sorawit Suriyakarn, its chief technology officer, and Paul Nattapatsiri, its chief product officer. In 2019, venture capital firms, notably the India division of renowned investor Sequoia Capital, contributed $3 million to Band Protocol. Later that same year, it raised an additional $5.85 million through an Initial Exchange Offering (IEO).

Since its inception in 2019, Band Protocol has been actively developing its platform. The organization has partnered with several decentralized finance (DeFi) projects to connect its Oracle solutions and supply these platforms with trustworthy and secure data.

Further, Band Protocol has had substantial expansion in the DeFi market in 2021, and a number of the industry’s top projects such as Yearn Finance, AAVE, and so on, are using its platform. The organization has also kept improving its technology and adding new features, such as the BandChain, which enables the development of decentralized exchanges and other dApps with faster development timelines and more scalability.

Generally, Band Protocol has become a significant player in the decentralized oracle market and is gaining popularity in the DeFi industry.

How does Band Protocol Work?

Band Protocol serves as a bridge between blockchains and traditional Internet data sources. By leveraging data streams from the rest of the internet, the software transmits information and responds to data requests from decentralized applications. It accomplishes this by utilizing its blockchain, which enables all of its operations to be checked and verified by the public.

The team claims that doing this, prevents manipulation, inaccuracy, or other types of corruption of the data that its users submit. It is the responsibility of validators to verify the accuracy of Band Protocol transactions and the addition of new blocks.

Source: Band Protocol

A Band Protocol validator is required to possess a minimum number of BAND (the blockchain’s native token), that they can either purchase or be given by another user. The network chooses the top 100 individuals who hold the most BAND tokens to be validators. The standards that validators must follow include staying online, responding to network events, and accurately verifying transactions. They risk having some of their BAND seized by the network if they don’t comply.

Band Protocol Ecosystem and Roadmap

When compared to competing oracle solutions, Band Protocol is intended to be quicker and more effective. It is also interoperable with the majority of smart contracts and blockchain development frameworks, ensuring that trusted data can be supplied to and from a variety of different blockchains.

Any user can start fulfilling data requests thanks to the permissionless oracle creation feature of the Band Protocol. Also, it provides incredibly straightforward smart contract integration that enables programmers to leverage Band Protocol’s oracle data with only a few lines of code by invoking a preset method.

The switch by Band Protocol from Ethereum to the Cosmos platform proves to be of advantage to the ecosystem largely due to high transaction fees and slower execution inherent with the Ethereum network. However, transactions in the Cosmos blockchain are quicker and less expensive.

Further, Band Protocol’s competitive advantage in the blockchain oracle industry is due to its openness to several types of data consumers. An important goal of the Protocol is to provide a self-service integration procedure. Users will have access to the resources they require.

According to the project’s roadmap, Band’s innovation will cause a huge rise in network data requests. The engineering crew will be freed of workload as a result. The company also seeks to collaborate with significant businesses and institutional data suppliers.

What Problem does Band Protocol Solve?

There are numerous data providers within the cryptocurrency space, however, there is no way to ensure the validity of data. Several decentralized finance (DeFi) protocols depend on real-world data to function, however relying on a centralized data source may be harmful to smart contracts.

DeFi protocols can use fully decentralized oracles like Band Protocol to guarantee actual decentralization. Decentralized oracles are preferable to centralized oracles for providing real-world data for smart contracts due to their decentralized style of operations.

It is evident that there will continue to be a significant need for decentralized oracles given the increasing influence of decentralized applications (dApps). With its distributed cross-chain oracle network, Band Protocol seeks to dominate the DeFi market, making real-world data easily accessible to dApps.

Benefits of the Band Protocol

• Some oracles are only connected to Ethereum, which makes sense given that it powers the bulk of dApps. Band Protocol, however, also integrates with other blockchains, serving as a crucial component of the infrastructure of dApps created elsewhere.
• Band Protocol serves as an important element to enable a wider dApp ecosystem outside Ethereum as dApp developers look to alternate blockchains for increased functionality and lower costs.
• Along with previous collaborations, Band Protocol has entered the Open API Initiative to help create a standard for APIs, which are what the protocol employs to collect data from off-chain domains and connect it to blockchains.

Risks of the Band Protocol

• The possibility of Oracle manipulation is one of the major risks linked with the Band Protocol. Smart contracts depend on off-chain data that is provided by oracles, and if an intruder were to be able to change the data an oracle provides, it might have serious repercussions for the dependent smart contracts.
• The possibility of smart contract breaches is another danger for Band Protocol. A bug in the code of a smart contract, which is a self-executing contract with the conditions of the contract written therein, could be used by attackers to take advantage of the system. All smart contract systems carry this risk, hence it’s crucial for developers to regularly analyze and verify their contracts to limit the risks.
• Furthermore, Band Protocol as a distributed system could be subject to a 51% attack. If a small number of individuals possess more than half of the network’s processing capacity, they may be able to control the consensus and hence influence the network’s behavior.
• Also, Band Protocol is based on the Cosmos ecosystem, which is less established and less tried-and-true than other blockchain systems like Ethereum. Therefore, there may be hidden dangers related to using the Cosmos platform which are yet to be found.
• Regulatory risk is another factor to take into account. As blockchain technology and the application of smart contracts are developing, it is unclear how regulations will be implemented by governments.

There are certain products within the Band Protocol worth exploring. In this section, we will be learning about what they are and their importance in the blockchain.

BandChain

BandChain is a high-performance blockchain platform designed to support decentralized applications and tokenized assets. It is built on the Cosmos network, which allows for interoperability with other blockchains, and provides a fast and secure environment for the creation and exchange of digital assets.

Band Protocol is built on top of BandChain and utilizes its decentralized oracle network to provide real-world data to blockchain applications. In essence, BandChain provides the infrastructure for Band Protocol to function as a decentralized oracle network.

Source: Bandchain - Band Protocol

Band VRF

Band VRF (Verifiable Random Function) is a consensus mechanism used in the BandChain to secure and validate the transactions in the network. A VRF generates a random value that is unpredictable and verifiable, and it is used in BandChain to randomly select validators to create and validate new blocks in the blockchain.

This helps to ensure that the consensus process is secure and that transactions are processed efficiently. The VRF mechanism is an important part of BandChain’s consensus algorithm and plays a crucial role in maintaining the security and reliability of the network.

Source: Band VRF - Band Protocol

Band Standard Dataset

Band Standard Dataset is a data standard used in the BandChain blockchain to represent assets and financial instruments in a standardized and interoperable way. The Band Standard Dataset is designed to provide a consistent and reliable way to encode financial information, such as assets, tokens, and derivatives, and to facilitate the transfer and exchange of these assets on the BandChain network and with other blockchain platforms.

The Standard Dataset helps to ensure compatibility and interoperability between different DeFi applications and services and makes it easier for developers to create new DeFi products and services on the BandChain platform.

Source: Band Standard Dataset - Band Protocol

Band: Data Provider

Band Data Provider is a service that provides real-time data feeds to dApps on the BandChain. The Band Data Provider is responsible for collecting, validating, and distributing data to dApps, and it helps to ensure that the data is accurate, up-to-date, and consistent. This data can include information about financial markets, economic indicators, and other relevant data that is used by DeFi applications and services. The Band Data Provider provides a secure and reliable way for dApps to access data, and it helps to ensure that the DeFi ecosystem on the BandChain network is transparent, efficient, and effective.

Source: Data Provider - Band Protocol

Band Protocol’s Recent Developments

• Launch of Mainnet (June 2020): Band Protocol launched its mainnet, allowing developers to build decentralized applications that can securely access real-world data. Also, in November 2022, Band Protocol upgraded its Mainnet.
• Integrations with DeFi platforms: Band Protocol has been integrated into various DeFi platforms, including Yearn Finance (September 2020), Aave (November 2020), MakerDAO (July 2020), NEAR(March 2021), OKX chain (July 2022), etc.
• Band Token (BAND) Listing: Band Protocol’s native token, BAND, was listed on several centralized and decentralized exchanges, including the Gate.io cryptocurrency exchange (August 2020).
• Community Development: Band Protocol has a strong developer community and has launched several hackathons (October 2020, and March 2021), grants (September 2020, and January 2021), and also educational initiatives to encourage development on its platform.
• Upgrades to the protocol: Band Protocol has made several upgrades to its infrastructure to improve the security and performance of its oracle network, including the addition of a new staking mechanism (December 2020).
• Partnership with Polkadot (January 2021): Band Protocol announced a partnership with Polkadot, a multi-chain network, to bring decentralized oracle solutions to the Polkadot ecosystem.
• BandChain 2.4 Upgrade: In October 2022, Band Protocol upgraded its BandChain 2.4. This upgrade enables the efficient calculation of gas consumption within the network.

What is BAND Token?

The distributed oracle network is powered by Band Protocol’s native token, BAND, and is secured using DPoS. The protocol’s decentralized governance system uses the ERC-20 utility token BAND, which is also utilized as a medium of exchange to get around open access data oracles. It is also used as collateral, for governance, and for staking.

Owners of BAND tokens can vote on important updates and enhancements to the Band Protocol, enabling the platform to be completely decentralized.

Tokenomics

Band Protocol held an initial coin offering (ICO) in 2019 to sell its token, raising over 5 million dollars in the process. The token supply was 100 million at the period of the initial coin offering. During this, over 12 million BAND tokens were sold. 27% of the total number of the token was distributed to Band Protocol’s early backers. 25% were reserved for Band Protocol’s ecosystem, while its development team earned 22% of BAND tokens for developing the Protocol.

Band Token Use Cases

BandChain’s native token, BAND, is the only token used on the network. The network also offers tokens as a reward for validators to create new blocks and deliver answers to information requests. Additionally, there are three ways for any network user to use the token:

• Token holders can stake their tokens to become a validator, which helps secure the network and earn rewards in the process.
• Token holders can give out their tokens to other validators so they can share in the fees and inflationary benefits.
• In addition, they can become participants in network governance.

Inflation

BandChain uses an inflationary strategy on BAND to encourage the token holders to use the network. This concept hopes that token owners would choose to stake their tokens on the network rather than using them only for trade or not utilizing them at all. The current annual inflation rate spans from 7% to 20% and is modified to aim at getting 66% of the total supply of BAND tokens staked. These specific inflation parameters are similar to those of the Cosmos network.

Validators and Stakers

The creation of fresh blocks and the processing of transactions are two responsibilities of Bandchain’s validators, just like in other Cosmos-based blockchains. As payment for doing those activities, validators receive BAND tokens.

The payment for creating blocks occurs from the tokens that were freshly generated on that block. The compensation for processing transactions, on the other hand, is derived from a fixed fee by the validator, while a portion of the block reward is sent to the community fund pool.

Delegators can still receive a percentage of the validator incentives even if they don’t want to become validators themselves. This is accomplished by staking their token on the validators of the network, and then they split the money made by those validators afterward. Delegators split the revenue generated by their validators, but they equally bear the risks. Therefore, prospective delegators must understand that delegation is not a passive process.

The following are active steps delegators should take:

• Conduct extensive research on the validators they intend to use before engaging them
• Actively monitor the validators
• Participate in network governance because a delegator’s voting power equals the size of their staked tokens

Pool of Community Funds

The community fund pool receives 2% of the overall block rewards. The payment is meant to encourage the ecosystem’s long-term viability. The governance system may also decide how the funds should be expended.

Slashing

A validator’s delegated stake is bound to be reduced partially if they act inappropriately. A validator may be terminated for one of three reasons: excess downtime, dual signing, or lack of responsiveness. While the third is unique to BandChain, the previous two are drawn from the Cosmos SDK.

Network and Gas Fee

The Cosmos SDK uses the unit “gas” to track the utilization of resources while a process is active. Gas is usually burned if read/write operations or other computationally demanding processes are carried out. There are two uses for gas:

• Stop blocks from using too many resources and guarantee that the block will be completed
• Avoid the misuse of the network by a malicious third party

Band Token Price History

Since its launch in 2019, the price of BAND has experienced significant volatility. Overall, there have been notable price rises as well as declines.

Band saw a price drop of about -48.17% in 2022, the BAND price ranged from $1.04 to $5.40 throughout the year, with $5.40 being the highest price.

The BAND token recorded an all-time high of $22.83 on April 15, 2021, and an all-time low of $0.203625, in November 2019.

Governance

BAND is utilized as a means of exchange to get around ad-supported data oracles, as collateral and staking for validators, and the protocol’s decentralized governance structure. Band’s token holders can vote on important updates and innovations to enable the platform to be decentralized.

Importance of holding BAND

The tokens were later released on the Band Network mainnet, also known as BandChain, as native BAND tokens, despite initially establishing themselves on the ERC-20 standard. By holding ERC-20 BAND tokens and subsequently redeeming them as native tokens, holders of the previous BAND tokens could also perform a comparable trade. This is required in order to take part in BAND staking, which is only accessible to mainnet tokens.

BandChain is secured with a Byzantine Fault Tolerance (BFT) consensus mechanism that is developed on the Cosmos Software Development Kit (SDK) and defends it from attackers. Combining this with the delegated proof of stake (DPoS) configuration protects the network’s oracles and enables BAND holders to receive staking rewards for transferring their stake to nodes.

Is Band Protocol a Good Investment?

In considering the Band Protocol as a bankable asset, here are a few factors to note:

• Band Protocol is a fully decentralized oracle network, meaning it is not controlled by any single entity and is less susceptible to manipulation or censorship.
• Band Protocol has a high-performance blockchain, BandChain, which allows for fast and secure data access for smart contracts.
• Band Protocol is interoperable with other blockchain networks, such as Ethereum and Polkadot, making it a flexible solution for developers.
• Band Protocol has a strong developer community and has launched several initiatives to encourage development on its platform.
• Band Protocol’s team has a strong background in blockchain technology and has raised significant funding from reputable investors such as ParaFi Capital, DeFi Alliance, and so on.
• Band Protocol has been integrated into various DeFi platforms, making it a widely adopted solution for secure and decentralized data access.

Moreover, the Band Protocol team is known for its fast pace of development and its focus on delivering high-quality products and services. It has a well-established development roadmap and a clear vision for the future of the platform, and it is committed to delivering updates and improvements that are in line with its vision that meets the needs of its users.

However, as with any software project, there can be delays and setbacks. While the Band Protocol team is working to deliver quality products and updates, there is generally some level of uncertainty involved in software development, and it’s important to understand the risks involved.

Furthermore, the Band token is another point of concern as a volatile asset like any other cryptocurrency. Though it has had a surge in the past, it is, however, impossible to know if that trend will repeat itself or whether it is just a spike. As always, much will rely on the performance of the cryptocurrency market.

Thus, investors must conduct an extensive study of the protocol and the token, to determine whether it is suitable for their portfolio before investing. It is pertinent to note that even cryptocurrencies with large market caps have shown to be vulnerable to bearish market conditions.

How to Own BAND?

To own BAND, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, and get it verified and funded. Then you are ready to go through the steps to buy BAND.

Conclusion

Band Protocol is a decentralized oracle network that allows smart contracts to securely access off-chain data and resources. It utilizes a native token (BAND) to incentivize and reward validators for providing accurate and reliable data, and a decentralized governance model where token holders can vote on protocol upgrades and changes.

Also, the oracle nodes are operated by validators, who stake BAND as collateral and are penalized when providing incorrect or malicious data. The protocol employs a multi-layered architecture for security and scalability, enabling the development of a wide range of decentralized applications.