How Crypto APIs work?

The blockchains are rather extensive, ever-expanding virtual databases, and there are numerous ways of analyzing the involved data.

This article serves the purpose of finding out different tools that exist to analyze blockchain data, be it to understand how a blockchain works or just looking into fine details of some transaction or block.

Additionally, it will provide particular focus on understanding how Crypto APIs (Application Programming Interface) work and how to use GraphQL for efficient blockchain data analysis. We are going to show how to collect and aggregate data with them.

How data is stored on the blockchain

A blockchain’s data is divided into blocks sequentially linked to a chain; one block follows another and points to the previous one. This preserves data integrity and immutability but brings several complexities when it comes to the extraction and processing of data for applications For developers interacting with blockchains, data is not formatted in a way that can be easily used directly in applications or front ends. For its efficient extraction, data needs to be indexed and organized.

Methods for extracting data from the blockchain

• Public APIs: Public APIs are the interfaces provided by blockchain services that users can access to get limited data on a particular blockchain using the internet. These work by making HTTP requests to specific endpoints and will respond with requested data in some structured format, probably JSON. These APIs are generally easy to use and may be appropriate for getting basic information such as transaction details, block data, and market prices;
• Nodes and RPC interfaces: In essence, running a full node means possessing the complete copy of the blockchain on a local machine. Nodes can talk to the network through the RPC interfaces, hence being able to communicate directly with the network themselves. Through sending RPC commands, users can query data, send transactions, or carry out any other operations done on the blockchain. This approach enables full-fledged access to data, thus leading to more detailed interactions with the blockchain;
• Smart contracts: Self-executing contracts whose terms are directly written into code and can store data on the blockchain. They can be queried to retrieve this data. Users typically interact with the smart contract through a transaction sent via the API or command line interface of a blockchain platform to execute the functions of the smart contract, thereby retrieving information stored in the smart contract.
• ETL processes: ETL processes include extracting data from the blockchain, transforming it into a format that it can accept, and then loading the data into a database for future analysis. These methods generally depend on custom scripts or ETL tools that interface with the blockchain and pull data, which is then subjected to the necessary transformations before being saved in a data warehouse. Indeed, very robust ETL processes are used to aggregate data from the blockchain into a general business intelligence too.
• Blockchain parsers: A blockchain parser reads and interprets raw data from the blockchain. They work by scanning the whole blockchain and extracting relevant information, which can be further processed and analyzed. Parsers are typically used for exhaustive and detailed data retrieval;
• Blockchain explorers: These web-based tools offer an interface for users to browse data on the blockchain. They are indexing data in the blockchain and making it searchable through a web interface. Users can look up transactions, addresses, blocks, and other blockchain statistics. Blockchain explorers are handy for a quick look-up or some essential data exploration without being technically skilled.

Here’s the information in a proper table format:

Why Use Crypto APIs

Public APIs are beneficial for crypto-asset data analytics. Here’s why:

• Real-Time Data Access: APIs provide instant market response, unlike explorers which may have delays.
• Efficiency: APIs offer direct data access without needing ETL processing.
• Convenience: APIs are easier to set up and maintain compared to blockchain parsers.
• Integration: APIs integrate seamlessly with analytical platforms, trading systems, and dashboards.
• Scalability: APIs easily scale data collection based on analysis needs.
• Customizable Queries: APIs allow tailored data retrieval, optimizing the analytics process.

Examples of API Use for Data Analytics

• Real-Time Analysis: Analyze trends and price volatility for trading decisions.
• Historical Data Analysis: Perform retrospective analysis to create and test trading strategies.
• Trade Volume Analysis: Assess market liquidity and activity.
• Automated Reporting: Generate automatic reports and dashboards for key metrics.

Examples of Popular Crypto APIs

• CoinGecko API
• Bitquery GraphQL API
• Kraken API
• CoinAPI
• DexScreener API
• CoinMarketCap API

How Crypto APIs Work

APIs are interfaces that enable communication between two unrelated systems, similar to a restaurant server connecting a customer and a chef. API specifications detail interaction methods, message syntax, and message frequency. For cryptocurrency trading, APIs enable programmatic interaction with exchanges for real-time market data, trading, and account management.

Types of APIs

REST API

REST APIs use standard HTTP methods (GET, POST, PUT, DELETE) for client-server interactions. They submit HTTP requests to resource-specific URLs, with servers responding in formats like JSON or XML. REST APIs are simple and widely supported, making them ideal for general use cases.

• Advantages: Easy to use, widely supported, well-documented.
• Disadvantages: Potential information redundancy, limited flexibility.
• Examples: Binance API, Coinbase API.

GraphQL API

GraphQL is a query language for APIs that allows clients to request specific data. A single POST request with a query returns the requested data, avoiding over-fetching.

• Advantages: Precise data retrieval, reduced duplication, flexible querying.
• Disadvantages: More complex setup, caching challenges.
• Examples: Bitquery GraphQL API.

WebSocket API

WebSocket APIs establish persistent connections between clients and servers for real-time data transmission, reducing the need for repeated HTTP requests.

• Advantages: Ideal for real-time updates, reduced latency.
• Disadvantages: Complex implementation, persistent connection support.
• Examples: Binance WebSocket API, Coinbase WebSocket Feed.

FIX API

FIX APIs are specialized for financial information exchange, ensuring fast, reliable communication between financial institutions.

• Advantages: Industry standard, high performance, reliable.
• Disadvantages: Detailed setup, requires specialist knowledge.
• Examples: Kraken FIX API, Bitfinex FIX API.

JSON-RPC API

JSON-RPC APIs use a lightweight protocol encoded in JSON for server-client interactions, supporting bidirectional communication.

• Advantages: Lightweight, supports notifications.
• Disadvantages: Less common, limited functionality.
• Examples: Bitcoin JSON-RPC API, Ethereum JSON-RPC API.

Building and Deploying a GraphQL API with The Graph

GraphQL is ideal for requesting blockchain data due to its efficiency and flexibility. The Graph is a decentralized indexing protocol that transforms blockchain data into consumable API endpoints using GraphQL. It allows efficient querying of blockchains like Ethereum and networks like IPFS.

Features of The Graph:

• Developers can define and deploy subgraphs, creating structured, fast access to blockchain data.
• Once indexed, data can be queried more quickly than direct blockchain queries.

For detailed deployment and usage instructions, refer to The Graph’s official documentation and this article.

Conclusion

This article covers various tools for blockchain data analysis, focusing on efficient data extraction and processing. Among these methods, public APIs, particularly GraphQL-based APIs, are highlighted for their flexibility and efficiency.