What is an API? Applications of APIs in the Cryptocurrency Market
API can be likened to the 'right hand' of programming when it comes to website development and mobile application design.
Hello everyone!
API can be likened to the 'right hand' of programming when it comes to website development and mobile application design. Its role is to connect the features of a web or app with databases, maximizing interaction between users and the application. So, what is an API? How are they applied in the crypto market? We will explore this further in this article.
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1. What is API?
API (Application Programming Interface) is a method that allows unrelated systems and applications to connect and interact with each other.
API can be understood as a tool that enables two or more applications to exchange and interact with each other, thereby creating more effective and convenient user interaction with the application. Therefore, APIs are commonly found in any software that requires interaction and connection with customers.
APIs play a crucial role in the modern 'flat world' era.
With API, developers can easily access and retrieve data from servers and display them on their own software applications or websites, instead of using an alternative solution or implementing it themselves.
Take a real-life example of an API:
Readers are probably familiar with the process of searching for and booking flight tickets online, such as through platforms like Traveloka or Agoda. When booking a ticket, we select information such as departure date, ticket class, and so on. Once these fields are chosen, the system will respond with information regarding the availability of flights, seat availability on the chosen date, and the respective prices.
At this point, the API plays the role of receiving information sent from your device and transmitting it to the airline's server. It then receives the response from the airline's server and sends it back to you. The applications we commonly use to view information about various flights are essentially collections of multiple APIs connecting to different airlines.
The principle above is applied to various industries and used on every device and application worldwide, thus creating a global network of interconnected information.
For DeFi and cryptocurrency trading, APIs enable users to interact with technical projects (through software rather than a user interface), allowing users to retrieve market data directly, execute transactions, and manage their accounts.
2. What is API in crypto?
Based on the nature of data source connectivity, APIs in crypto can be broadly categorized into two types: off-chain APIs and on-chain APIs:
Off-chain APIs are APIs connected to external data sources. Some notable examples include Binance API, Coingecko API, Coinbase API...
On-chain APIs are APIs connected to on-chain data sources. Prominent names in this category include Infura, Alchemy, Moralis...
API serves various purposes in the crypto space, including:
Providing price data for asset pairs in the market. Depending on the speed, APIs can be used for various purposes, such as trading bots, price display, asset trading on an exchange through a third-party application.
Aggregating information from multiple exchanges into a single wallet. This allows users to monitor the overall market or create arbitrage trading bots.
Simplifying the development of on-chain applications by accessing data stored on nodes via API.
And many other applications.
3. History of API
APIs have been around since 2000, and two of the earliest and most famous APIs, eBay and Salesforce APIs, were introduced around that time:
eBay wanted to provide users with easier access to its website and enable bulk listing uploads.
Salesforce was looking for a solution to allow more users to connect existing data to their Salesforce platform.
Two years later, Amazon Web Services emerged. Since then, the number of available APIs has exponentially increased. However, the quantity of APIs is not the only thing that has changed in recent years. With the development of open-source APIs and REST APIs, the rules have been rewritten for both the Internet and software development. The trend toward cloud-based computing technology promises even more profound changes in the future.
4. Applications of API
APIs are everywhere, and most of us interact with them daily without even realizing it. Whenever we post updates on Facebook, compare flight or hotel prices on travel websites, or conduct online transactions with our banks on our phones, there are APIs behind these interactions.
Some applications of APIs include:
4.1. In the real world
4.1.1. Weather forecast
To better understand the function and scope of APIs, let's consider an example related to weather forecasting. A company wanting to develop a weather information tracking utility for smartphones would need to collect and store weather data from millions of sources worldwide using various APIs.
These APIs allow application developers to create utilities for users to access a consolidated weather forecast information dashboard. Additionally, the APIs ensure that files can be exchanged with servers through phones: when you provide your location, in return, you receive weather forecast information.
4.1.2. E-commerce: Transmitting real-time inventory data
Within e-commerce, retailers use APIs to track their inventory and provide customers with information about the availability of products.
4.1.3. Service providers: Streamlining customer communication
Medical service providers use APIs for their online websites, where patients can schedule appointments or search for specific services. Government agencies use APIs to register voters and manage directories, while non-profit organizations use APIs to connect with sponsors.
4.1.4. Digital bank
APIs for digital banking platforms allow banks to integrate with electronic banking services to enable lending, account maintenance, payments, and deposit acceptance. They also enable banks to notify customers of their balances and fees. In doing so, banks can attract new customers and further engage with their current ones.
4.2. In the cryptocurrency
4.2.1. Interacting with an exchange platforms
APIs in the crypto market allow developers or service users to interact with exchange platforms. Some tasks that can be performed through APIs include:
Executing trades
Retrieving real-time market data
Receiving market data directly
Calculating and balancing transaction fees.
4.2.2. Cryptocurrency wallets
Cryptocurrency wallets help manage public/private key pairs to control ownership of cryptocurrencies. They serve as a central hub where you can manage your assets and connect with decentralized applications (DApps).
Cryptocurrency wallet APIs link with various types of digital currencies and perform various functions. Taking Binance API as an example, it allows you to set up a 'kill switch' on your wallet to sell cryptocurrencies immediately, place orders, and cancel open orders.
4.2.3. Portfolio tracking
Cryptocurrency APIs can be used to provide historical data, blockchain data, and market data for portfolio management software or portfolio tracking applications, allowing users to efficiently manage their asset holdings. These APIs can provide portfolio owners with information such as transactions made from a specific address, track fees paid in a transaction, or specific transaction times, monitor deposits and withdrawals,...
4.2.4. Custody of cryptocurrencies
Cryptocurrency custody APIs from custody service providers integrate with cryptocurrency wallets and other digital asset management applications to store and secure cryptocurrency assets, especially the private keys that verify ownership of those assets.
4.2.5. Cryptocurrency mining
Cryptocurrency mining APIs can connect cryptocurrency mining applications to information from a specific blockchain, providing detailed information about the blockchain's mining tools, notifying users when a new block is created, or when a reorganization occurs.
4.2.6. Cryptocurrency lending
APIs for cryptocurrency lenders can easily perform tasks like verifying ownership rights and the asset history, net worth, and creditworthiness of borrowers. A cryptocurrency lending platform using these APIs can facilitate direct lending and borrowing of cryptocurrencies between users.
5. API classification
Hiện nay có hàng nghìn API khác nhau đang được sử dụng và với mỗi lần giới thiệu hoặc cập nhật phần mềm mới, các API mới sẽ được thêm vào. Một số API được cung cấp công khai, trong khi các API khác hoàn toàn chỉ dành cho nội bộ hoặc bị giới hạn từ hai đối tác trở lên. Về cơ bản, có ba loại API khác nhau, điểm khác biệt nằm ở khả năng truy cập của chúng:
5.1. Internal API
Internal APIs, also known as private APIs, are hidden from external users and are only visible within the internal system. These non-public APIs are not intended for external company use but are designed for internal purposes.
For example, companies use them to achieve greater efficiency in various areas, such as product development, human resources, and customer service.
5.2. Partner/Customer API
Partner APIs are APIs provided to strategic business partners on a restricted basis, meaning they require special permission to access. Partner APIs are typically accessible through a developer portal for public APIs.
5.3. Open-source API
Open-source API, also known as a public API, is a software interface provided publicly to software developers. An open API is published and shared on the internet, allowing the owner to provide access to anyone.
APIs and API integration can be found everywhere, across all industries and fields. Today, open-source API options bring greater flexibility to developers as well as the ability to access exclusive software and web services. Some advantages of using open-source APIs include:
Open and flexible concept: Integrating open-source application solutions is ideal to ensure that enterprise infrastructure remains flexible, future-proof, and not dependent on a single proprietary technology.
Data sharing and innovation: Rapid advancements in computing power and data availability have opened up new opportunities to derive clear business value from information. Data is increasingly shared through APIs.
Cost savings: Open-source solutions for application integration are much more cost-effective than proprietary software, both in terms of initial investment and maintenance costs.
Valuable detailed information: APIs provide more interaction and data collection capabilities. This way, companies gain a better understanding of their customers and processes, allowing them to adjust their products and services to better meet user needs.
Community support: The community of developers around open-source projects is an invaluable source for sharing insights, tricks, and application improvements.
6. Some of the top open-source APIs
CoinAPI: CoinAPI provides fast, reliable, and harmonious APIs for receiving real-time information or data from the cryptocurrency market. It is also working on aggregating all cryptocurrency exchanges and generating data in both a simple format and pre-processed.
BraveNewCoin: This is a cloud-based API that provides smooth and seamless data for cryptocurrency time-series data and real-time data, with the capability to receive data from various markets and different assets.
As the future of the Internet is Web3.0 and the Metaverse has the potential to use cryptocurrency payments and NFTs, cryptocurrency APIs will play an indispensable role - not only in finance but in all aspects of social life.
7. API evaluation criteria
API comes in various types to serve different purposes, so choosing an API that suits the user's needs is more beneficial than selecting the best or most expensive API.
For example, if you want to create a crypto trading bot to react quickly to market conditions, you will need high-speed APIs. However, if you only want to display price information on a wallet and do not require high speed, you can use the Coingecko API.
Another example, if you are a developer and want to quickly develop DApps on Ethereum or other chains, using APIs from providers like Infura and Alchemy will help you quickly access on-chain data.
Other factors such as cost, speed, usability, and the reputation of the API provider should also be carefully considered.
8. Some notes when using APIs
In addition to clearly defining the purpose of using API, users should also consider the following during API usage:
Adequate API knowledge: If you are not well-versed in APIs, it is advisable to use trial accounts to avoid any risk of asset loss.
API Permissions: Depending on your needs, select the appropriate API permissions to mitigate associated risks.
Storing API Keys: Typically, API usage involves the storage of API keys. They are as critical as private keys, as anyone with access to an API key will have the same level of access as initially granted. Therefore, securely storing API keys and being prepared to revoke them if necessary is essential.
9. Closing thoughts
APIs are a crucial component in today's flat world. They form the threads that connect the global network of information. Understanding APIs and their roles is the foundation for comprehending new breakthroughs in information technology in the present and the future.
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