CEO Dmitry Zhelezov: Building a Data Backbone for Polkadot

This article was written by Subsquid CEO Dmitry Zhelezov. To receive regular updates from Dmitry and from the entire Subsquid core team, subscribe to our email list.

Building an application is in many ways similar to building a house. Without proper plumbing, wiring, and heating, a house is hardly liveable. Similar to that, an application without data is useless. Therefore, the way that data is delivered is critical to any project. Middleware does exactly that — it transforms and plugs data into your favourite app, connecting it to the outside world.

For blockchain-powered DApps this means deciphering, aggregating, and filtering raw on-chain data down to a human-readable format. Think of all the numbers you see navigating your favourite DeFi DApp — what the app’s front end shows you has come a long way from the transaction bytes stored in a block.

Now throw in decentralisation. What does it really mean to have decentralised middleware and why is it actually important? Well, we all want our DApp to be immune to service interruptions, for example AWS/Cloudflare/Google Cloud outages, and for there to be no way for a nation-state to be able to cut access on a whim. It all boils down to giving power back to the user, and always has been.

Subsquid was conceived as a solution that makes building middleware simple, yet resistant to the issues that plague centralised data access services. We have taken a grassroots approach towards decentralisation that, so far, can be divided into three stages. Let’s take a closer look.

Gradual Decentralisation

At the first stage, we set out to deliver the best tool for indexing on-chain data for teams building on Substrate. The goal was to develop an open-source framework that would make it trivially easy to index on-chain data. Substrate on-chain data is infamously cumbersome to deal with due to ubiquitous runtime updates and a zoo of different (para)chains and edge cases. The quirks are multiplied by the ever-changing libraries like polkadot.js. After endless iterations, we are proud to have our own library for communicating with Substrate nodes, and to offer the best tooling to deal with runtime upgrades and generate type-safe interfaces.

The second milestone for Subsquid, delivered in December 2021, was a platform that enables Web3 builders to run Squids (in other words, APIs built with Subsquid) on a hosted service without needing to bother about cloud bills and maintenance. One can deploy a Squid API directly from the command line without even leaving the terminal window.

The third round of decentralisation, which we’re currently about halfway through, will make the data sourcing for Squids more resilient and reliable. Anyone will be able to run a Squid Archive and earn rewards for providing data to Squid APIs and other data consumers. Data consumers have to stake SQD to query data from Archives, creating a positive feedback loop for the growth of the network of Squid Archives while stimulating a natural demand for SQD tokens. Let’s see why:

SQD Tokenomics

For DApp developers there will be a natural demand for tokens since in order to deploy a Squid one has to stake a certain amount of SQD. These SQD tokens remain staked for as long as the service is being used. It’s a good set-and-forget deal for the developers, as the initial investment will quickly pay for itself if the DApp gets traction. In fact, one could even borrow SQD tokens on a lending market (e.g. C.R.E.A.M) and further minimise the downside.

New parachains, which are interested in bringing new developers onto their networks, will be able to do so by implementing Squid infrastructure and enabling easy access to on-chain data. In particular, new chains will be able to incentivise Archive operators to run nodes by boosting rewards and delegating SQD tokens.

In turn, attracted by high rewards, node operators will run more Archives, making the network more resilient. At the same time, running an archive requires a security bond of 10,000 SQD, so there will be additional demand for SQD tokens coming from the prospective node operators.

In summary, both tech and non-tech-minded SQD holders can leverage the growth of the DotSama and Subsquid ecosystems by either staking, delegating SQD, or running Squid Archive nodes.

You might then be asking yourself how you can start participating in the future Subsquid economy. Well, whether you’re a DApp developer, chain builder, node runner, yield ape (aka delegatoooor), or simply a Subsquid meme connoisseur, we ask you to stay tuned for updates on our Discord or any of our other official channels.

​​Dmitry Zhelezov is the CEO and technical co-founder of Subsquid. Dmitry holds a Ph.D. in Mathematics and has extensive experience leading development teams in the blockchain space. He can be contacted directly via Telegram (@dzlzv) or Twitter (@dizhel).

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We are building a data backbone for #Web3. APIs and analytics on 33 networks (and counting). http://t.me/subsquid & http://discord.gg/subsquid