The Importance of APIs for Blockchain Technology
The role of API
Application Programming Interface (API) is a software intermediary designed to simplify the interactions with applications. APIs help applications talk to each other by retrieving and interpreting data according to the user’s demands. As such, they save users time and eliminate need for technical know-how while interacting with software and complex programs by providing feedback in a readable way. Consequently, APIs have become ubiquitous in the modern technological world as they facilitate loads of our interactions with different websites, mobile apps and computer programs. They have become an integral part in the operations of many businesses and even a valuable resource contributing a significant share of revenue for large organizations like Google, Amazon and Expedia, among others.
APIs are quickly becoming valuable and useful tools for blockchain technology, just like they are for modern businesses. They help investors, traders, businesses and basically anyone interested in the blockchain space to make sense of all the technical stuff going on in the background. Evidently, blockchains are designed in a complex manner, thus making them difficult to understand for those without a programming background. APIs remove this barrier by synthesizing blockchain data and converting it into easily accessible, understandable and actionable information. APIs also help sort and package the blockchain data into well documented information for specific audiences to facilitate decision-making. They make it much easier to query the blockchain due to their standardization, as well as their ability to version data in a useful way for various consumers.
Application of API in crypto
APIs are powering several essential tasks in the cryptocurrency industry, thus aiding in analyzing the market and performance of various blockchains. For instance, there is a host of crypto APIs for aggregating market data and analyzing transaction volumes across blockchains that traders can use to determine market sentiment.
Crypto entities such as CoinMarketCap and CoinGecko provide useful data, including coin prices, trading volumes together with high and low points, trading histories and current news that can help guide traders on the best actions. Their APIs also provide ranking for various coins in terms of popularity, market capitalization and other statistical data that users can rely on to develop their trading strategies.
It is almost impossible for individual traders to obtain such data on their own as it requires a huge amount of resources, expertise and complex execution. Therefore, such crypto APIs fill a very huge void and meet a great need with such great efficiency at significantly lower costs and great convenience for users.
Other useful APIs are those offered by crypto exchanges, thus allowing users to easily trade various coins among themselves in an open market. Crypto trading systems have great APIs that support the execution of orders at prevailing market prices to other legitimate traders. Particularly, decentralized exchanges provide APIs that enable live execution of trades from the user’s crypto wallet without requiring them to open the wallet itself. Other wallets, like Exodus, have built-in exchange functionalities, allowing crypto holders to instantaneously swap the digital assets based on their real-time value without having to visit crypto exchanges.
Crypto entities like HashCash have built bots and algorithms that enable users to deploy automated trading strategies. Such platforms use price and trade execution APIs to develop the model-specific trading strategies that professional traders like hedge funds can deploy for a completely hands-off approach.
API solutions for enterprises
The blockchain space is rapidly growing beyond the individual crypto users and retail investors with uptake by institutions growing over time. While organizations have hesitated to adopt blockchain technology due to its technicality, scalability issues and lack of fit, among other reasons, this has begun to change recently with the benefits of the technology becoming increasingly publicized.
The entry of institutions into the crypto space has not been entirely smooth, with organizations coming into direct contact with some critical hurdles that are innate to blockchain technology.
One of the major challenges for institutions has been extracting and exploring data from blockchains. This is due to the bulky nature of blockchain that makes data synchronization difficult. It is also not possible to directly analyze blockchain data using conventional methods due to its heterogeneous and complex data structure. The process, therefore, requires a huge amount of resources and skilled personnel that organizations may not have or would be willing to hire.
However, this shouldn’t be a problem for much longer as the blockchain community is working hard to develop enterprise-grade solutions to ease institutional adoption of the technology.