A quick disclaimer upfront: All information given in this presentation is researched and intended to be educational and illustrative to the specific topic as always. Any companies, products, people, or other items mentioned do not constitute an endorsement, recommendation, or relationship. Every owner has to do their due diligence, as the decisions and responsibility about any investment lie with the owner. This is no financial advice.
What is an API?
The abbreviation API stands for "Application Programming Interface" and describes a program interface. The connection is made via a source code level in which a connection between two programs or two inputs is controlled. Applications that are provided with interfaces on the Internet are called Web APIs.
How does an API work?
With an API, individual pieces of information are exchanged between different applications. The interface ensures the transfer of data by executing commands and instructions that have been determined in advance. Commands (the so-called syntax) are then used to retrieve information, which can then transmit and display information from one program to another or from one retrieval point to another on-demand. This system is done by including API keys, which are provided by an API provider and can thus be built into the respective interface for queries.
One can understand the principle of APIs using the example of a flight search website.
The website offers the possibility to start an input to search for possible flights and connections. The input fields offer selection options based on predefined countries, cities, airports, and airlines, as well as time periods and dates. After entering the desired connection and sending the request, the information is bundled into a query using the API and forwarded to the various companies for commercial flights, with the endpoint requesting feedback of information from the respective company using the given parameters.
The parameters are then compared with the data available at the commercial flight company and matched at the specified times. The filtered information (if any) is then returned via the API and sent to the flight search website, where it is collected until the API has completed all nodes of data collection. Once all the results have been received, the information that was specifically created and collected in response to the request is listed and presented in tabular form as a result for the end-user. This final list can be sorted by other parameters such as cheapest price, fewest flight stops, or similar so that the information received via the query of the API can be sorted and neatly presented.
This example shows that the individual airlines are the API providers whose key is integrated into the flight search website. As more airlines are added to the search, more API keys are used to target the different endpoints in a query, which can then return more results, provided the search results match.
However, APIs are not just there to deliver information via manual query. They can also provide automated information and deliver it precisely at predefined times.
In stock exchange trading systems and markets, for example, the price representation of prices is continuously queried and updated within milliseconds in order to present the correct price at all times. This is important because for traders the exact recording of prices (especially when using algorithms, bots, or similar) is absolutely essential so that trading events can take place exactly at specific times. For example, in the case of trading mechanisms for bots, when certain stock prices and thresholds are reached, purchases and sales can be made automatically, faster, and more precisely than any human input can make possible.
How do APIs work with cryptocurrencies?
Cryptocurrencies are - for the principle of the representation of an API - exactly the same as any other trading currency. There is a price, a graph, and information on the respective trading volumes, participant numbers, activities, purchases, and sales. This information is held via an API and rendered on an information page, which is then the source of the direct information.
For example, if you want to take a closer look at a certain cryptocurrency or want to have a chart about it, you can open the appropriate page with the respective data to get exactly the information. Here you can then get the chart, the number of daily growth or loss, the holder, and similar data presented.
In order for a currency to be able to reflect this information, an information application must be made in the form of registration (especially when a token is newly established). In this case, the respective token operator will register with the API provider and submit his information such as the name of the cryptocurrency, presentation, and distribution of the
respective total mass of tokens, address of the liquidities, and information on the times of trading and other data. this data is then fed into the system of the API provider, which creates a page for the respective new project, which retrieves and displays the information based on the given links and parameters so that everyone can receive this information when accessing the page. After integration into the system, this information can then also be made available to other apps using the API key, which can then represent a price for the holder of the currency in a wallet, for example. Therefore, prices and charts of new cryptocurrencies can only be displayed when the necessary information can be provided by the API provider using the key. The APIs for blockchains are usually provided for free.
Security of APIs
APIs are protected by security keys. The standard is characterized by OAuth (open authorization) and TSL encryption (Transport Layer Security). This means that the security for the transmission of data can only be represented by the use of the security key, the private key, and the generated information between interfaces. Information that is not to be provided by the API can only be accessed if the interface provides more information than it should or if it is not protected by protective mechanisms such as querying the security and private key. API gateways, for example, provide the protection that queries to the respective APIs can only take place if the basic keys are integrated.
Advantages and disadvantages of APIs
The use of APIs offers many advantages. On the one hand, data queries are generalized and significantly simplified, since the application of information requests always leads to the same possibility of storing and automatically retrieving information. The timeliness, availability, and presentation are also automated, faster, and simplified. Fewer modules or databases need to be created and programmed to capture large individual segments, saving labor, time, and money and making the infrastructure more compact and convenient.
Furthermore, the collection of data is clean and can always be clearly and easily fathomed when it is processed, as the data has been stored in categories. The stability of a system is thus also given since the data are not arbitrarily settled.
The disadvantage here - as so often - is the possibility of security gaps. Bridges and interfaces are always another major danger for backdoors in a system, which can release data and make it available unprotected. Here, too, it is better to invest some time and check the interfaces down to the smallest detail instead of creating general queries and transferring them into the system, which may result in security gaps.
Also, the massive creation of APIs in a system may not only speed up data retrieval but also slow it down. This would occur when bots or other algorithms continuously query information
and thus overload the API, which can then slow down the entire system. There are timeouts and time-controlled systems for this, but here too it is important that care is taken before the system is integrated, not after.
Future of APIs
APIs have a specific role in the long term: the provision of information. This will continue to grow in the future and will also grow with the complexity of the systems and the information required.
The integration, querying and provision of APIs will play an important role here because the growth of the platforms and the integration of old systems in WEB3 will also make it necessary to change the APIs. This implies that the integration of APIs must meet the latest interface requirements, security standards, and needs.
However, this should not be a problem for this technology, since APIs are very advanced in terms of their basic core and are therefore very variable in terms of programmability. As long as the development remains at a very high and advanced status, the technological leap of the main applications is no danger for the integration of future API systems.