The Graph

A case for GRT


  1. The Graph (GRT) is a decentralized protocol for indexing and querying blockchain data. An index is a saved cache that can be used to query data much faster than searching blockchains directly. Similarly, Google creates indexes to search the web quickly. For this reason, The Graph has been called “The Google of Blockchains.”
  2. Almost every decentralized application (dApp) built-in crypto utilizes indexes for timely access to its data. Before The Graph, almost all of these indexing solutions were custom-built in-house for each blockchain/application. This costs time and can be difficult to do correctly due to the sometimes complex nature of crypto data. The Graph is a decentralized protocol that allows companies to not need to re-implement this common work. Instead, they can use the decentralized Graph Protocol to get accurate and timely data for their blockchain of choice. Some of the largest projects have utilized The Graph in their dApps including Uniswap, Synthetics, and Aave.
  3. The Graph can support data not just for the Ethereum blockchain it’s implemented on, but also for arbitrary blockchains. Currently, it supports Ethereum and other popular layer-1 and layer-2 blockchains. Each different blockchain is stored on a separate “subgraph.”
  4. The Graph serves queries through Graph Query Language (GraphQL), which is a flexible common standard that makes it easy for almost any developer to use even if they are not blockchain experts. Due to this and other decisions, The Graph has done a great job in making their system very easy to use by most developers.
  5. The GRT token is used as an incentive for the many participants that run the system. Indexers get GRT to maintain an accurate index for the needed data. Curators get GRT to police the accuracy of the indexed data and suggest new subgraphs to index. Delegators receive GRT for signaling their trust in a particular indexer by delegating part of their GRT to them in a stake. Together, these parties make participating The Graph sustainable and economically scalable.

Major Bullish Arguments

  1. Almost every dApp needs an accurate index of blockchain data.
  2. Many major players are already depending on The Graph for their products or partnering including Uniswap, Synthetics, and Coinbase. The Graph is already seeing widespread usage and adoption by the dApp community even in its current form.
  3. The Graph protocol has been audited by three independent blockchain entities.
  4. GRT has the potential to become net-deflationary as 1% of query fees are burnt.
  5. GRT has a treasury managed by the Graph Council, which can finance future improvements to the project. This process is transitioning to becoming (hopefully) more decentralized and community-driven than the original Graph Foundation’s direct leadership.
  6. GRT can support other non-Ethereum blockchains, with no real theoretical limit to which blockchains can be indexed by the protocol.

Major Counterarguments

  1. The token distribution for GRT is scheduled to happen far too quickly to allow for price appreciation. Increasing the base supply by 3x in just 6 months may be too much for the community to absorb without dumping the price. This is likely a major part of the reason why although GRT is used by so many projects, the price of the token has not as of yet been appreciated proportionally to reflect that usage.
    • While this may indeed limit price appreciation temporarily, this particular downward pressure should last no longer than those months. Eventually, GRT is likely to find a bottom in price and appreciate from there. The token has appreciated 20x from the ICO price despite such an aggressive emission schedule.
  2. The original implementation of The Graph was highly centralized and is currently in migration to a more Decentralized Autonomous Organization (DAO) model. This migration needs to occur successfully and completely to maintain its market share. As of yet a relatively smaller portion of GRT tokens have been entrusted to the community. This creates the risk that even under a DAO model the governance of the protocol may still be too centralized.
    • Currently, it is true that only about 35% of tokens are in community hands. However, this portion should increase in time as the early Venture Capital investors, company investors, and early team members sell at least some of their tokens to realize profits. It is difficult to know precisely exactly which token allocation targets are ideal for a project in the early stages of growth. The distribution of GRT may end up being sufficiently decentralized to fulfill its purpose. As of yet the project does not seem to be suffering any lack of real adoption due to this concern.

Price Potential

  1. Almost every dApp will need to depend on an index of blockchain data to achieve reasonable speed and efficiency. The Graph has proven that the index can be external to individual dApps without sacrificing performance or security. It seems reasonable to assume that the total value of indexing protocols like GRT can become proportional to the total value created by the dApps that use them.
  2. GRT functions as a blockchain index but also shares many similarities with oracle protocols such as Chainlink. Though the usage is different, many of the same dApps that leverage one may also implement the other. GRT could perhaps secure a stable position similar to LINK, though perhaps it would be unlikely to surpass it in valuation.

Major Risks

  1. Even while GRT grows in usage, the sudden unlock of 3x the current supply in just 6 months would almost certainly create more net supply than demand at least for a portion of that period. The majority of the rest of the token supply should become unlocked to the various investors/treasury over the next 2 years.
  2. The Graph is not yet as fully decentralized as other important DeFi projects. However, the team has committed to improving that. As long as the team follows through with that, the protocol should be able to do well. But, there is always a chance that the team may not fully push the project to the high level of decentralization desired by some in the DeFi community. Should that happen it could open the door to a competing protocol with greater decentralization in governance taking market share.

Additional Resources

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