Band Protocol explained for beginners
Band Protocol, also known by the market ticker BAND, is a blockchain built on the Cosmos Network designed to be a decentralized oracle.
Band Protocol provides secure and reliable access to real-world data for blockchains.
An example of that data might be stock prices, weather data, sports scores, etc.
Smart contracts can then use this information to execute pre-agreed requirements.
I know you are wondering what an oracle is and why real-world data is important for blockchains.
But don’t worry, I got you covered, as in this article I am going to explain what Band Protocol is, how Band Protocol works, and what the Tokenomics of the Band token are.
What is Band Protocol?
Band Protocol was founded by Paul Nattapatsiri, Soravis Srinawakoon and Sorawit Suriyakarn back in 2017.
Band Protocol was initially launched on the Ethereum Network in 2019 as an ERC-20 token however, a year later in 2020 the company decided to launch the official BandChain on the Cosmos Network for cheaper and faster transaction finalization.
As I mentioned earlier, Band Protocol aims to be a decentralized oracle. But what exactly is a Blockchain oracle?
What is a Blockchain Oracle?
An oracle acts as a bridge between blockchains and information in the real-world through smart contracts.
Smart contracts are simply pieces of code that self-execute once the pre-agreed requirements within the smart contract have been met.
This allows users to trade assets, buy NFTs, interact with oracles and more, without a third party to approve the transaction.
To make it simple, imagine that you are watching a soccer match between the blue and the red team. As a fan of the red team you bet 1 ETH that your team will win against the blue team.
This is where oracles come in and bridge real-world information such as the final score of the match in real life with the blockchain, in this case the Ethereum blockchain.
In our example when the red team wins the match, the smart contract automatically executes and returns your 1 ETH plus your profits to your wallet without going through a middleman, such as a betting company.
Of course the applications of oracles extend far beyond soccer matches, for example trading stocks, collecting weather data, payments information etc..
But how does Band Protocol work exactly?
How does Band work?
BandChain was built using the Cosmos Software Development Kit – or SDK and has the Inter-Blockchain Communication Protocol – or IBC enabled.
As a result, BandChain is highly interoperable, meaning it can link to a wide variety of other blockchains with little-to-no delays.
To recap, the Cosmos SDK, is a toolkit for creating blockchain applications.
The Cosmos SDK provides developers with a set of tools and libraries to create custom blockchains that can connect to other Cosmos Blockchains.
Normally, blockchains built with the Cosmos SDK, use Tendermint Core’s Proof-of-Stake consensus mechanism to verify their transactions.
However, Band Protocol stands out from the rest of the Cosmos blockchains by using a faster and more democratic variation of Proof-of-Stake, called Delegated Proof-of-Stake.
Under Proof of Stake, validators are selected randomly based on the amount of tokens they have staked, meaning deposited to the network, to validate the network’s transactions.
On the other hand, Band holders can vote which validator should validate the next block, giving the opportunity to validators that have earned a good reputation rather than the wealthy ones.
After they successfully produce a block, validators in Delegated Proof of Stake, can distribute their block rewards to those who voted for them.
Lastly, the IBC, or Inter-Blockchain Communication Protocol, is an authenticated way to relay messages between independent blockchains and is part of the Cosmos SDK.
What makes Band unique?
Band Protocol is unique in many ways, however what makes it stand out from the rest of the Blockchain Oracles, is its 3 main focal points. Speed and scalability, cross-chain compatibility, and data flexibility.
Speed and scalability
When it comes to speed and scalability, Band Protocol’s goal is to provide trustworthy data to several public blockchains, quickly and efficiently.
This is possible thanks to its unique design, which allows it to offload the heavy and resource-intensive tasks, such as collecting and distributing data, from the smart contract platforms, onto itself.
This approach not only prevents network congestion and high transaction fees, but also allows the same data to be used and verified across multiple blockchains.
Cross-chain compatibility
As I mentioned earlier, Band Protocol has the IBC enabled, which allows the transfer of data to other blockchains that have the IBC also enabled.
Band Protocol also supports custom one-way bridges, which enable quick data transfers with blockchains that don’t support the IBC.
Data flexibility
Finally, as far as data flexibility concerned, Band protocol seeks to remain agnostic, meaning that it can support different forms of data and various methods of collecting it.
For example, most of the data are public and accessible by everyone, however other types of data might be permissioned and accessible only to few individuals.
For that reason, Band Protocol allows for data monetization by individuals and centralized entities by using on-chain payment and thus discarding the need for a middleman.
But how about the Tokenomics?
BAND Tokenomics
In total, there will only ever be 135M BAND tokens.
Originally, these were released as ERC-20 tokens on the Ethereum network when they launched back in 2019. However, when the BandChain went live in 2020, the native BAND token was born.
The native BAND token and the ERC-20 token version of BAND are easily interchangeable with one another at a 1:1 ratio.
BAND is the primary medium of exchange for the Band ecosystem, and it is used to pay for transactions, smart contracts and data exchanges.
As with other Cosmos SDK-based blockchains, these BAND tokens can be staked to the network to earn a reward proportional to how much you have staked and they also allows holders to participate in protocol governance. Further, of the 135M, 25.6% went towards the Ecosystem development.
A further 22% went to the Foundation that looks after the blockchain, 20% went to the Team and 5% was given to advisors.
Additionally, 10% was sold during the seed sale, and a further 5% was sold during a private sale. Finally, 12.3% was sold during the Launchpad sale.
In conclusion, Band Protocol is an innovative decentralized oracle network that aims to securely provide real-word data to blockchain applications, fast and cheaply.
The flexibility and cross-chain compatibility of Band Protocol set it apart from other oracle solutions, opening up new possibilities for collaboration and innovation in the blockchain space.
While Band Protocol has made significant progress since its inception, it’s important to keep in mind that the blockchain industry is constantly evolving, and the success of any project depends on various factors.