What is Band Protocol? (BAND)
The Beginner’s Guide
Band Protocol is a software designed to incentivize a network of users to provide real-world data to decentralized applications (dapps) running on blockchains.
For example, if a dapp developer wants to enable his or her users to enter wagers on the future price of gold, it would need to be able to determine its price at the desired later date.
To ensure its smart contracts execute correctly, Band Protocol provides such a service through a software that incentivizes a special class of its users, known as validators, to provide and verify external data.
In this way, Band Protocol is often described as a “decentralized oracle” system, a description given to blockchains like Chainlink, which, like Band, incentivize users to provide verifiable data.
Originally running on the Ethereum blockchain, Band protocol eventually built its own blockchain using Cosmos technology to relay data across different blockchains, including those built on Cosmos.
Who created Band Protocol?
Band Protocol is developed by an eponymous startup based in Thailand. It has three founders: Soravis Srinawakoon, who serves as chief executive officer; Sorawit Suriyakarn who is chief technology officer; and Paul Nattapatsiri who is chief product officer.
In 2019, Band Protocol raised $3 million from venture capital firms including the India unit of legendary investor Sequoia Capital. Later that year, it raised a further $5.85 million in an initial exchange offering (IEO).
The protocol had an initial supply of 100 million BAND tokens, 12.37% of which was sold during its token sale. Band has also conducted private token sales, raising $2 million this way.
In total, over 27% of the BAND token supply has been sold to early investors. A further 25% of BAND tokens are reserved for the Band Protocol ecosystem and 22% has been set aside for the development team and the foundation that oversees development.
How Does Band Protocol Work?
Band Protocol acts as an intermediary between legacy Internet data sources and blockchains.
The software handles requests for data from decentralized applications and relays information using data feeds from the rest of the internet. It does so by using its own blockchain, which allows all of its transactions to be publicly checked and validated.
The Band team argues this helps ensure the data its users supply isn’t manipulated, inaccurate, or otherwise corrupted.
Validators are responsible for checking that transactions on the Band Protocol are accurate, and for adding new transactions to the Band Protocol blockchain.
A validator on Band Protocol must be in control of a certain amount of BAND tokens, which they can either buy or themselves or be delegated by another user.
The top 100 candidates with the most BAND tokens are selected by the network to become validators. Validators must abide by certain rules, such as making sure they don’t go offline, responding to network events and confirming transactions accurately.
If they do not, the network may confiscate some of the BAND tokens they hold.
Why does BAND have value?
Notably, the Band Protocol applies an inflation schedule to its BAND cryptocurrency, meaning that over time, the value of each BAND token gets reduced.
The reason for this is to encourage users to deposit their coins with validators. When a user deposits coins with a validator, they earn tokens to offset the inflation rate.
Band’s inflation rate ranges from 7% to 20%, and it fluctuates depending on the total amount of BAND deposited with validators. The target amount is to have two-thirds, or 66% of all BAND tokens, deposited with validators.
Depositing coins with a validator is also known as staking, and users who stake BAND earn both newly minted tokens from the protocol as well as fees from applications that use its service.
Additionally, BAND holders who stake their funds can enjoy bonus tokens from an ecosystem fund that rewards early users. The fund offers 3.16 million bonus tokens in the first year, down to 315,000 tokens in the fourth year.
These mechanisms mean that Band Protocol rewards BAND holders for their participation in maintaining the system and ensuring that it’s delivering accurate external data to users.
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Why Should I Use BAND?
BAND may be of interest if you believe decentralized applications will continue to proliferate, and that these softwares will require data to be validated by other blockchains.
You may want to use BAND if you wish to participate in the design of this system, as holding BAND means you can vote on proposals that affect the system’s rules.
As demand for the system grows, such proposals could affect how much you earn with your tokens from staking BAND.
However, Band Protocol is not the only decentralized oracle system that runs on a blockchain. Competitors like Chainlink are also popular and may put pressure on the price of BAND.
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Note: Trading BAND is not available to residents of Australia and Japan at this time.