Today we’re excited to announce that we’ve raised $5M and we have the funding we need to build and launch the decentralized network! 🚀🚀 https://t.co/RyDCRSIPcc
— The Graph (@graphprotocol) June 30, 2020
Since launching in January 2019, the data indexing protocol has grown to support many leading DeFi protocols including Synthetix, Uniswap, Aave, Balancer, Aragon, and others. All of these DeFi protocols are querying data from The Graph’s open APIs, called subgraphs, which help define how to index data like trade orders, DEX liquidity, and more. In other words, The Graph acts as a critical piece of middleware for making blockchain data more digestible for DeFi applications, allowing them to easily pull historical data from Ethereum.
The company previously raised a $2.5M seed round led by Multicoin in January 2019 along with participation from Spencer Noon‘s DTC Capital. Both funds continued their participation in this round. With the indexing protocol handling a majority of DeFi queries to date – including a recent spike from 25M queries per day to 45M in just two weeks – the protocol is in need of an upgrade to handle the newfound demand. Recently, The Graph experienced an outage that affected some of the popular DeFi applications relying on the protocol, largely due to the recent surge in demand from yield farming.
We’ve been experiencing truly insane load on our hosted service and are seeing high levels of failed requests. We’ve maxed out the largest DB size on Google cloud. Yesterday we had 50% head room.
Sincere apologies to the teams affected. Our engineers are hard at work on a fix.
— The Graph (@graphprotocol) June 24, 2020
As a result, the $5M in fresh capital will be used to build and launch The Graph’s decentralized network, effectively allowing dApps to run their own node without relying on The Graph’s infrastructure to process queries.
What’s interesting to note is that the fundraise comes via the SAFT – a simple agreement for future tokens. While official details on the upcoming token distribution have yet to be released, The Graph CEO Yaniv Tal reported to CoinDesk that it will be taking a similar path as Compound, the DeFi lending protocol responsible for the recent craze with yield farming thanks to their governance token – COMP.
We can imagine that – just with that tidbit from Tal – The Graph will be distributing tokens to users who leverage the protocol for querying data. Rather than using The Graph tokens to pay for queries, an economic model that may have been popular back in 2017, we can expect that users will be able to pay for queries using more liquid assets like DAI or ETH while receiving a “cash-back” in The Graph’s native tokens. With that in mind, those fees may be distributed to node operators who processed the queries on the decentralized network, or used for buy-back and burns on GRAPH tokens – two popular models present with many DeFi protocols today.
But this is all speculation (for now). We’ll be sure to report the details when they’re released to the public.
Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.