Why is Band Protocol Chainlink's toughest competitor?
Band Protocol is a network or cross-chain data oracle platform that aggregates and connects real-world data and APIs, with smart contracts. The main application it has within DeFi is pricing information in the token exchange process, and also, in loan guarantees. The design of its oracle technology is versatile, because it allows developers to use any details when querying data on demand, receiving a real-time update with all oracle data downloaded into the BandChain, in which real-world events, sports, weather data or random numbers are usually included. In addition, the BandChain is designed to be compatible with most smart contract and blockchain development frameworks, but basically Band Protocol does the heavy lifting of extracting, aggregating and packaging data from external sources, in a format that is easy to use and verify across multiple blockchains.
It is clear that the Blockchain world, particularly the world of decentralized finance (DeFi), needs more oracle services and projects working on providing these services.Why? Because it is a sector in growing demand. While, Band Protocol scales to the leading position, it is Chainlink that occupies the position of utility strength and growth, which came hand in hand with the explosive DeFi growth of 2020. Chainlink is a decentralized node network of oracles that provides data and information from sources outside the blockchain, and those data inputs and outputs are secure and tamper-proof for any blockchain and for smart contracts.
Now, in the battle of these two major decentralized oracle projects there are differences that I'm going to highlight to you below:
| Band Protocol | Chainlink |
|---|---|
| Data quality: initially it only allows connection to free APIs while support for paid or password-protected APIs is still a feature that is limited, because it depends on external data providers outside the blockchain accepting cryptocurrency payments for that service. What that causes is that the available data requested by users is more limited, so the quality of the data that Band Protocol oracles have access to is of lower quality. | It allows connection to any APP and data sources, both free and paid APIs and even private APIs. |
| Network design: Their oracle is based on their own blockchain, where oracle nodes, in addition to fetching information from external providers which is their primary function, are also required to do secondary work such as creating or validating blocks. That is something that delivers more work to that data delivery oracle, because these block validator nodes experience high operational costs when there are long network synchronization times. | Chainlink is not a blockchain, so the nodes only operate as oracles focused solely on data delivery and do not block production or block validation. That means the nodes are extremely lightweight and require no state processing or synchronization, allowing the nodes to be activated and used instantly. |
| Decentralization: it processes all queries and data responses through a single blockchain, which limits peak performance. The oracle protocol is more open and decentralized compared to Chainlink, as the decision-making power is transferred to the users. | It has an unlimited number of oracle networks that can operate in parallel and run natively on any blockchain. Although it is not a purely centralized service because the team behind it decides on the cooperations, and partly also on the data providers they use, therefore the users cede these decisions to the company. Also the fees applied on the token depends largely on them. |
| Team: they have a small team that has not yet produced any original academic research, and they also lack experience in building distributed systems and oracles. That is something that has led them to abandon the original design they created of that protocol and have changed it on numerous occasions. | The team has over 40 experienced members, have been building oracles and presenting original academic research since 2014. |
But mainly for these security reasons, Chainlink is overall a far superior oracle solution compared to Band Protocol because of the need to extend fund protection, and it also already has 20 times the market capitalization of Band. But when we talk about low-cap altcoins, which is the case of Band Protocol compared to the size of Chainlink, we are talking about riskier investment projects, where the percentage of investment and allocation in a portfolio should be lower than cryptocurrencies with higher market cap and higher network effect, as is the case of Chainlink.
Particularly the most recent altcoins in the market and with less market cap, are risky due to the fact that generally their technology is under development and their team must deliver development updates, and integrate them to other projects through partnerships. Now, the growth potential is significantly higher in these smaller altcoins, because if the technology advances, works and is integrated, their network effect and usage increases, and along with it their price, which we typically see in this market going to 10, 50 and even 100 times their price.
We also know that there is no profit without risk and currently there are still a lot of opportunities with Band Protocol, not only because of the price performance of the token but also because of the high staking returns for the token, which makes it more attractive and attracts more and more people to its market. That's why I think Band Protocol if it doesn't reach Chainlink's size, which is right now unlikely, it can reach 50% or 60% of the size, being its biggest competitor, and that could multiply 10 times its price. Anything is very possible in this market, especially if you consider that the DeFi field is still young and has huge growth potential.
