Interpreting The Graph: The data market provides a rare product fit. Will GRT become the new Alpha under the rigid demand for data?

Written by: Xiaobai Navigation Coderworld

Entering the new year, looking back at the crypto market in the second half of last year, sentiment and hot spots seemed to be experiencing a roller coaster-like ups and downs.

In September, some Ethereum developers believed that they had “chosen the wrong industry” and that most projects lacked novelty and real demand. At the same time, there was also a voice that believed that investing in the last cycleTokenIt's a waste of time. Speculating on new things instead of old things, old coins gradually lose their value...

And with AI The Agent craze has ignited the crypto market. Coupled with the recent collective recovery of old coins, everyone’s enthusiasm for participating in projects, whether new or old, has been pushed to the extreme, and they will look for more reasonable reasons for the rise.

In the current market environment, what kind of projects should we focus on to gain more opportunities?

The cycle repeats itself, and price fluctuations are the pulse of the market's restlessness; but through the bull and bear markets,Demand AdaptationIt is the lifeline of the project.

The presence of demand does not mean that prices will skyrocket, but the absence of demand will inevitably mean low liquidity or even zero liquidity in the end.

Based on the above ideas, what other tracks are beyond our sight but still have strong demand?

最近流行的一种叙事是， AI Agent 需求更多更好的数据才能变得更加智能；但实际上，Any Web3 project actually has a continuous demand for data, but it is difficult for ordinary people to observe:

Data Index.

Querying the disordered data on the chain through indexes is the basis for any project owner, developer, or even on-chain user to understand the project, the fundamentals, and even all analysis.

As long as new crypto projects emerge, there will be a demand for data query/indexing. The more projects there are, the greater the demand.

In this direction, the old project The Graph is a representative and is still strong in places we cannot see:

As of December last year, the project has been established for 4 years. So far, it has built more than 10,000 subgraphs, 100 indexers, 170,000 delegators and more than 800 curators.CommunityAll over the world.

In the world of crypto, where popularity is fleeting, this kind of longevity is rare.

如果一个基建真的被需要，这才是项目能够存续的下限。但 The Graph 的上限在哪？代币 GRT 又是否能打破炒新不炒旧的魔咒？

If you are not familiar with The Graph project and the demand for data indexing, and are trying to find more profit possibilities in the current market environment, you might as well dive into the ocean of on-chain data and explore an unknown but in-demand underwater operation of The Graph.

Data indexing requirements, a perpetual motion machine under hot spot rotation

When analyzing a project, the ecological niche it occupies is very important.

Where does The Graph stand in the current crypto ecosystem? In fact, you can think of the entire market as an ocean, with two completely different situations above and below the water.

Due to people’s limited attention span, you are more likely to see the “excitement” on the surface, with different projects appearing and leaving one after another, while PMF (product-market fit) remains more of a slogan and exploited narrative.

But the author believes that the real PMF of the crypto market is not actually on the surface.

Underwater, no matter how the hot spots rotate, whether it is AI or Meme, the product that most projects will use is the best PMF at this stage; easy to observe include Pump.fun and others.

If trading is likened to a continuous warm current under the sea of cryptocurrencies, Pump.fun is easy to understand; but on the other side, there is another demand that is not easy to observe, deeper, but sufficient to support various projects on the water: Data Index.

In layman's terms, you may not need the data yourself, but as long as new encryption projects emerge, there will be a demand for data query/indexing.

For example, an on-chain DEX needs to analyze its own transaction history and liquidity, etc., and needs to check data;

又比如一个 Meme，它要检视自己代币的 Burn 情况，费用回购是否有买新的代币，也需要查数据…

You may not find the so-called rigid demand in the crypto market, but providing data services for projects is the most rigid demand among rigid demands. Crypto projects need to provide services to users (or at least appear to have services) based onXiaobai NavigationOn-chain data, conduct data analysis, visualization and real-time monitoring related to your own business.

If a demand exists in the current crypto market, it is basically not very picky about projects, which actually means that the market is huge.

On the other hand, if everyone has a demand for data indexes, instead of distinguishing whether the demander is a good person or a bad person (there will also be air projects), it is better to focus on those who provide shovels - this is also the reason why The Graph A peculiar yet realistic ecological niche in the current market environment.

This position and market is not so easy to find, which is why you need to pay attention to projects like The Graph:

Providing data indexes for other projects is a practical, widespread, and real need in the current environment.PMF, the project itself has the possibility of surviving through the cycle;

From the perspective of the project owner, if you were a crypto project, what would you think?

The data on the chain is messy and fragmented. If I want to analyze whether user A has transferred asset B to C, it is actually very difficult. It is too costly for crypto projects to do it themselves, so there must be a service provider to give them a "shovel".

So the question is: where does the data I need come from? How can I check it faster?

You need to go into The Grpah to see the details.

Understanding The Graph and Subgraphs in Seconds: The “Electronic Catalog” of the On-chain Library

Looking through the research reports and articles in the Chinese area, there is actually not much introduction to The Graph.

On the one hand, data indexing is more oriented towards the To B link and is far away from ordinary users. On the other hand, the underlying technology seems even more difficult to understand amid the hype and noise.

Therefore, we try to use a more popular analogy here to help you quickly understand The Graph; once you understand that data indexing is a rigid demand, you may have a different view on the investment value of Graph and tokens.

As an example, stripping away all the technical details, you can think of The Graph as abooksadministrator.

Now different public chains are a bit like a huge library, which stores a huge amount of information (transaction records, smartcontractstatus, etc.). But this library is very special:

• The books (data) are constantly increasing.

• There is no fixed directory or indexing system.

• To find specific information, you may need to look through thousands of books.

There are too many books but not enough guidance, and finding what you want is like looking for a needle in a haystack.

So, The Graph is like the librarian of this library:

• It will continuously organize and index newly added books (Blockchaindata).

• It creates an easy-to-use search system (similar to a library's electronic catalog).

• When you need specific information, you just tell The Graph what you want, and it will quickly find relevant books and"page number"(SpecificBlockchaindata).

Therefore, The Graph What we are actually doing is to classify the on-chain data of the entire crypto world into a neat electronic catalog, making it more convenient for you to search.

The benefits of doing so are obvious.

Developers and projects do not need to build complex data indexing systems themselves, and users can get what they need more quickly.BlockchainInformation. This makes it easy to build complex decentralized applications (DApps) becomes easier at the data level.

Going back to the project value and narrative we discussed earlier, the long-term effect of The Graph is thatNo matter what your purpose is when you go to the library (whether the application is real or imaginary), as long as you want to look up a book, you will need to use The Graph. This is the real reason why data indexing is a necessity.

You may ask, what if I don’t want such a large library and I just want to check out the books that interest me?

This also involves a core feature of The Graph - Subgraph.

For example, if you are interested in “decentralization”exchange(DEX)" is of particular interest to me. You can create a subgraph specifically for DEX, which actually contains content including but not limited to:

• 要索引哪些特定的智能合约

• Which events to track (e.g. trades, liquidity added, etc.)

• How to organize and store this data

• How to query this data

So, if you have multiple specialized interest directories, multiple subgraphs will be formed, facing various scenarios in the crypto world and for various applications to use.

Or to put it more simply, a sub-image is more like a classification number in library management, with one type corresponding to books on the same subject.

And these subgraphs are still growing.

According to Messari data, as of the end of the second quarter of 2024, 7,370 subgraphs have been published to the decentralized network, an increase of 278% from 1,952 at the end of the first quarter of 2024.

The number of active subgraphs on The Graph continued to grow in the third quarter, and as of January this year, the number has grown to over 10,000. This steady growth demonstrates the growing importance of The Graph in supporting decentralized applications at scale.

Once you understand the concept, it will be easier to understand the advantages of The Graph.

Since specialized directories can be created for multiple specific topics, corresponding to the rigid needs of different encryption applications, at least two different things can be done:

• From blockchain raw data to creating subgraphs, building indexes for different topics

• Different projects use indexes through Graph's API to provide data-based services for their respective businesses.

Decentralized data index market

Another question arises: if the librarian controls the query index of the entire on-chain data, why should you trust this administrator?

In fact, in the design of The Graph, different roles in the network jointly undertake the work of "library management" in a decentralized manner, rather than one person having the final say.

In more detail, indexers, delegators, curators, and developers together form a decentralized data indexing market.

First isIndexer, whose role is the most basic, that is, running nodes to process and index blockchain data. They are the main data processors of the network and are responsible for the initial steps of creating and maintaining the index of the subgraph.

The motivation for doing so is that they can earn fees and rewards by staking GRT tokens (the project's native token) and providing query services.

This is very similar to the verification nodes on Ethereum or other L1s. You need a certain scale to run; but if you are not large enough but still want to participate, another role is involved.Client.

Similar to liquidity staking, delegators can also delegate their GRT to indexers to increase the network’sSafetyperformance and efficiency without having to run your own node.

Financially, delegators also get to share in a portion of the profits earned by indexers.

Secondly, there is another key role.Curator.

When indexers create thousands of subgraphs, which one is the best or most suitable for a certain use case? This is where curators come in to play a role, discovering high-quality subgraphs and signaling them.

Economically, they can be rewarded with GRT tokens when the subgraphs they choose become widely used.

In addition to these roles, project developers or independent researchers can use the subgraph data in The Graph, define the data structures that need to be indexed, and build applications that utilize this data; they benefit from being able to access blockchain data quickly and efficiently, reducing development costs and complexity.

而这里的最终用户，则可以是 DApp、数据分析师或其他需要区块链数据的实体，获得快速、可靠的数据访问服务。

So, overall we can see:

Some roles provide subgraphs and indexes, while other roles consume subgraphs and indexes, forming a decentralized data market that is not controlled by a single entity and involves multiple parties.

However, what I am more interested in is whether such a market is really used by people.

Another data report from Messari shows that as of Q2 last year, The Graph's total query fee revenue in US dollars increased by 160% month-on-month, reaching an all-time high of US$113,000;

At the same time, data demandReached an all-time high of over 2.9 billion queries, an increase of 84% from 1.6 billion times in the first quarter of 2024.

In Q3 last year, this data wasReached more than 5.3 billion times,Month-on-month growth 79%.

Entering the new year, although the author has not obtained more public data, better market conditions and more narratives will inevitably give birth to more projects. At the same time, the active ecology has also stimulated our aforementioned data query needs.

There is real demand, but it may not come from the retail clients we generally think of.

The data market, which has not yet been widely mentioned and discovered, also seems to indicate that old projects can also become Alpha that benefits from cyclical rotation.

The Graph's business is indeed good as evidenced by the data, but how is its token GRT performing? As ordinary players, what space can we participate in?

GRT, a beneficiary of stable returns

First, the role of the GRT token in the aforementioned data market is to regulate/motivate the behavior of market participants:

• Demand side:Data demanders/dapp developers need to pay GRT to query indexes, which generates continuous consumption demand;

• Supply side:Indexers provide indexing services and receive GRT rewards; curators/developers discover high-quality subgraphs or create subgraphs and receive GRT rewards

Corresponding to what ordinary players can participate in, that is, becoming a delegator, staking GRT to the indexer, allowing it to provide more indexing services (similar to staking ETH to the node to maintain the networkSafety)

But the question is, is it worth staking GRT? Perhaps we can analyze it from two directions: the external competitive environment and the project itself.

First, look at the competition.

Since there is an opportunity cost for funds, you can also choose to pledge your assets to the DeFi protocol as an LP.

But from the perspective of the track as a whole, DeFi itself is already very competitive, and the ROI has been or can be quickly discovered under the promotional image. At the same time, being an LP may also result in losses due to problems such as impermanent loss.

However, for VC coins pledged in High FDV Low Flow, the coins may gradually fall due to the unlocking conditions of different terms, and the income from the pledge may not offset the loss of the original currency.

If you pledge it in the data market, it will be a less competitive track with a relatively fixed ROI.

Secondly, let’s take a look at the benefits of staking on The Graph itself.

In general, stakers’ specific rewards depend on the Indexers they choose, the amount of GRT staked, and the overall activity and revenue of the network.

When developers or users query data on The Graph, they need to pay a query fee. Indexers have the right to decide how much of the query fee they want to keep. In the example below, the indexer chooses to keep 13.96% of the query fee as his own income.

The remaining part (100% – 13.96% = 86.04%) is distributed to the Delegators.

Let’s take a practical example: Assume that a total of 1000 GRT is staked to this indexer, and I have staked 100 GRT (of the total 10% staked):

• For a query fee of 100 GRT

• The amount available for distribution to stakers is 86.04 GRT

• As a staker, you will receive 86.04 * 10% = 8.604 GRT

In other words, if the index demand is stable, the more you stake, the more GRT you can get in proportion.

The question then becomes whether the GRT currency itself will experience a significant depreciation.

We are not a professional secondary trading team and cannot give accurate financial advice. But in comparison, GRT, as an old project, has an obvious advantage: Full circulation, no unlocking selling pressure.

Of course, the price of GRT also follows the crypto cycle, but if we look at the past year, the token price is even 30% higher than this day last year; at the same time, looking at the on-chain data and correlations, there is almost no trace of active market making and manipulation.

Therefore, if you only consider staking and obtaining stable returns, it may still be an attractive option if the number of native coins increases and the price rises steadily.

Although it cannot compare to the excess returns of Meme and others, the risk is relatively small and the growth rate is steady, and the situation of PVP is not that serious.

future

The Graph Are there more catalysts and events to attract the market's attention??

What we can see now is that the project is not limited to the original indexer design, but also makes more explorations in AI-related fields.

For example, the essence of indexing services is to make on-chain data easier to search. In fact, this is already close to the infrastructure layer of AI services, providing underlying protection for the recently popular AI Agent.

Secondly, The Graph is also exploring hosting AI models in its own network. You can upload the requested model to the selected indexer, perform reasoning, and return the results to the gateway. The Graph can also charge service fees to form a stable business model.

而更为直观的 AI 代理产品上，项目也在构建类似于加密版 ChatGPT 的工具，建立在 The Graph 索引的去中心化交易所的数据之上。例如你可以直接问哪个DEX交过去七天内的交易量最高，利用索引查询返回结果。

One advantage here is that, unlike the emerging AI Agent projects, The Graph actually takes the route of using indexes as the stage and AI as the performer.

Going further, you can write articles in line with hot narratives; and taking a step back, you can still do data indexing to maintain the baseline and lower limit of the business.

This may also be one of the best footnotes to the PMF (product usability) of encryption products at this stage.

CurrentPMFNot out of the circle and greater idealism, providing data for all encryption projectsIndexing ServiceIt is a pragmatic and continuous PMF in itself.

Products with real demand deserve a place, and paying attention to the growth of such products and projects is also a good way to obtain certain returns.

The article comes from the Internet:Interpreting The Graph: The data market provides a rare product fit. Will GRT become the new Alpha under the rigid demand for data?

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