An API or Application Programming Interface is software that allows two unrelated systems to interact with each other. For example, Binance is a Centralized Exchange where users can trade cryptocurrency; on the other hand, TradingView is a market tracker that helps investors to gain investment insights by tracking market data and providing tools for further technical analysis. These two systems aren’t directly related, but with the help of an API, data from TradingView can automatically be imported into Binance.
How Does an API Work?
From the example above, we can define an API as a software intermediary that allows two applications to interact. Hence, the API takes information from one application and displays it on the other without requiring the end user to switch applications manually. Hence, With the TradingView API on Binance, traders need not manually switch between both applications.
A simple explanation of an API can be described as placing an order from a restaurant; you know what you want to eat, and the kitchen can only produce it; hence, you are a system, and the kitchen is another quite unrelated system. However, to place your order, you do not go into the kitchen; instead, a waiter brings the kitchen’s menu to you (allowing you read data from the kitchen), and then you tick what you want, and the waiter communicates your preferences with the kitchen, and you get your meal.
Basically, API reads data from one application and provides it on the interface of another application. So, APIs can be used on all forms of software, as long as there is data to read and it isn’t too sensitive to be read on another application. Of course, the data from an API is read-only; you can see the kitchen’s menu, but you can’t alter it. In the same way, APIs allow data to be read from one app and interpreted on another.
What Are Blockchain APIs?
Blockchain APIs enable applications to read data to and from Blockchain-related platforms like crypto exchanges, portfolio management applications, automated trading platforms, analytics, and security. Hence, by reading data from another application, blockchain-based platforms can improve the services they render.
Types of Blockchain APIs
Crypto Wallet APIs: These permit third-party applications to access, verify and manage funds in your wallet. With APIs, assets in a wallet can be verified without providing wallet private keys; hence, third-party applications can confirm the status of individual public wallet addresses. For example, crypto lending platforms can utilize an API connection to verify assets a borrower intends to use as collateral.
Non-custodial crypto wallets also use APIs to facilitate connection with dApps; hence, with APIs, these dApps can read information from your wallets.
Portfolio Management APIs: APIs can also be used in portfolio management; The portfolio management application depends on real-time data obtained via API access from reputable applications. Hence, users can see the real-time value of their assets, as well as monitor all new deposits and withdrawals, track fees, and monitor every single cent that goes in and out of their aggregated portfolios.
Block Explorer API: This enables an application to get real-time access to important blockchain statistics and use the information obtained to perform on-chain analysis. Similarly, blockchain nodes can use APIs to read information from blockchain explorers.
Crypto Exchange API: There are several API applications on Crypto exchanges; with APIs, social trading platforms can read the trades of an individual and publish them for other users to copy, generating income for the original trader. Also, Crypto exchanges can utilize data from other third-party applications (like the Binance & TradingView example stated earlier); any third-party application that can provide a supplementary service can easily be imported into crypto exchanges via APIs.
Crypto Mining APIs: These allow crypto mining applications to read data from a specific blockchain. As a result, the system can obtain details about a block’s miner and other details that indicate when a block is created.
Crypto Accounting API: Accurate computing with cryptocurrency may not be possible, especially in countries like the United States, where calculating crypto taxes may be difficult; however, with accounting APIs that can read data from user portfolios, proper accounting can be done, helping users to accurately report their tax returns.
Some API examples include:
Blockchain API from Blockchain.com, which is used to obtain data about transactions, addresses, blocks, etc., from the Bitcoin blockchain.
EtherScan API from Etherscan.io, which is a collection of several APIs with different purposes, including querying transactions on the Ethereum network, building dApps, creating smart contracts, etc.
CoinMarketCap API from coinmarketcap.com, which is mainly used to obtain data such as asset prices, market capitalization, supply, and all other fundamental information of nearly all the coins in the crypto space.
Several other use cases for Application Programming Interfaces (APIs) exist within and out of Blockchain applications. With the steadily increasing usage of dApps, cryptocurrency, and other Web 3.0 technologies, Blockchain APIs will become widespread, enabling satisfactory services for users.