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Could The Graph Represent the Future of the DeFi Space?

By Chris MacDonald – Nov 16, 2021 at 9:30AM

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Crypto investors are increasingly looking at the developer side of the crypto world.

The Graph (GRT 32.98%) makes the list of cryptocurrencies that could change the game for crypto developers, as selected by Chris MacDonald, a Fool.com contributor focusing on the crypto sector, in his discussion with Motley Fool analyst Asit Sharma. This clip from "The Crypto Show" originally aired on Backstage Pass on Oct. 27.

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Asit Sharma: Moving onto The Graph. The Graph, it's still a pretty large crypto asset, not quite as big as the first two we've discussed. GRT is the native token. It's got a market capitalization of about $4.6 billion. This is more in line with the DeFi tokens that I talked about last week -- Compound (COMP 3.99%) and Aave (AAVE 0.55%)

It's an indexing protocol for querying networks like Ethereum, and it powers applications in the DeFi space. So this is another asset that is an under-the-hood type of asset. It's got a lot of utility.

Again, utility is one of the things that we're looking for so far. There's a small team of people who are researching assets and discussing them every week. Because I think that while it's fun to invest in maybe some of the meme tokens, without a sustained use for an asset, inevitably, you're just playing a momentum game.

The Graph is really interesting. I talked about application programming interfaces, APIs, in the real-world. The Graph is sort of an ecosystem for DeFi which uses a lot of APIs -- they call them subgraphs -- that allow you to query a blockchain and receive data. A little similar in some ways to Chainlink (LINK 0.26%), but Chainlink is focused on how you supply data to blockchains, while The Graph makes it easy for you to use simple APIs to query blockchains, to pull data out of the Ethereum blockchain and use that in a decentralized network and maybe form smart contracts using that technology.

It's really been, I think, highly used in the DeFi space. Uniswap (UNI -0.17%), Synthetix (SNX 13.83%), Aave, Balancer (BAL 0.99%), Decentraland (MANA 0.36%), and a ton of other well-known decentralized finance apps or dApps are using The Graph. Its native token has done pretty well on the market as well. As we said, it's now the 42nd largest cryptocurrency in terms of market capitalization.

Do you own any of this token by any chance, Chris? I had some Graph early on. I regret [laughs] I sold it. I think I might have even had this via Coinbase's earn function. I'll explain what that is.

Chris MacDonald: No, I don't. It is an interesting one to look at though.

Because like you said, the application side or the dApp side of the crypto world, I think a lot of crypto investors, myself included, really think about what's the value of the crypto token that I'm investing in? But there's the whole applications, the developer side of the crypto world that is really important for creating that utility that you talked about before and making sure that the blockchain is doing something useful.

Being a store of value is one thing, but The Graph is really an interesting one to look at from that API standpoint, from a developer standpoint. I think investors are starting to look more at "how can we utilize the blockchain?" versus "should I invest in this blockchain or the other one?"

Today's segment is a little bit more on the intermediary side of the crypto world, but I think all of these are important in the utility that they can create. I think you did a really good job of recapping this one, so I'm going to leave it at that.

Chris MacDonald owns shares of Compound. The Motley Fool owns shares of and recommends Aave, Chainlink, and Compound. The Motley Fool has a disclosure policy.

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