What Is Band (BAND)?

Band (previously known as Band Protocol) is a decentralized oracle network that links the external world to the blockchain ecosystem. The network enables smart contracts to fetch information that resides off-chain, such as asset prices, sports scores, weather updates, random numbers, and external API information.

This becomes very important considering the fact that smart contracts cannot fetch any off-chain information by themselves. An example of such a scenario can include a lending application fetching token prices from the blockchain. Another example can involve a prediction market application fetching event outcome information.

A derivatives platform, for instance, would require some form of reliable market information. With Band, all these requirements become possible through the creation of an infrastructure layer for data requests.

Why Oracles Matter in Blockchain

The capabilities of blockchains are highly efficient for keeping and processing information within their systems. Nonetheless, they are disconnected from any processes happening outside the blockchain network by definition. This is referred to as the oracle problem.

Even though the actions defined by a smart contract can be performed according to programmed logic, accurate data is required for them to be executed properly. Incorrect or outdated data can make a smart contract fail in its task.

Examples of the fields requiring the use of oracle networks include:

• Decentralized finance (DeFi) lending/borrowing platforms which require asset prices

• Derivatives platforms operating based on market data

• Prediction markets which require data about events' results

• Insurance projects depending on any trigger in the physical world

• Gaming or non-fungible token (NFT)-related projects requiring randomness or other data

That is why the infrastructure for receiving real-world information to the blockchain has become another layer of blockchain technologies.

How Band Works

Band utilizes BandChain, which is an independent blockchain network created using the Cosmos SDK. BandChain is specifically tailored towards handling oracle-related functions such as fetching, aggregating, and settling data.

In cases where a decentralized application requires external data, it places an order through Band, after which validators working within the BandChain network fetch the data from the appropriate data sources, perform the aggregations, and return the data to the smart contract making the request.

Typically, the process involves four stages:

1. A dApp requests some off-chain data.

2. BandChain's validators collect data from the data sources.

3. The collected data is then aggregated based on the oracle script.

4. Finally, the output is returned to the smart contract.

Oracle scripts are created by developers and specify what type of data is needed, where to source the data from, how to process the collected data, and how to return the output.

The Role of BAND Token

BAND is the native coin of BandChain, the Band blockchain platform. It ensures the security of the network and provides incentives for validators and other members of the blockchain.

The validators stake their BAND to join the network and fulfill the requests regarding data from oracle services. They can receive rewards for their activities and help ensure the security of the network. The users can stake their tokens with the validators they trust to receive rewards from securing the network as well..

This system is based on the concept of Delegated Proof-of-Stake. The validators should work correctly, because of the aligned incentives. 

Building the Data Layer for Web3

Band is one of the pieces of infrastructure that facilitates blockchain application connectivity with the physical world. Band facilitates connectivity between APIs and data feeds, helping in making smart contracts more practical.

Band does this by ensuring security on the network and aligning incentives for the different parties involved; validators, delegators, developers, and users.

With cryptocurrencies becoming increasingly multichain, the importance of having a secure data infrastructure becomes ever greater. The role played by Band is therefore to ensure that external data is available and verifiable.