Emergence of Distributed Software-as-a-Service: The Graph case study
By: Mathieu Tahon
Tags: GraphQL, Ethereum, Open Data, SaaS, Graphprotocol

While investigating a weird price feed issue on Uniswap, I discovered The Graph project and I immediately felt quite excited with this product. In a nutshell, The Graph indexes the Ethereum blockchain by listening to Ethereum events and exposes the content as entities through a simple GraphQL API.

Of course such architecture can be custom-created by an experienced developer for a given project, but what I found most interesting is that they managed to generalize it to any blockchain-based project using the concept of Subgraphs, making the data public and auditable in the process.

The Graph architecture, source: The Graph

When I discovered the project, The Graph was already providing a free hosted service and the number of requests and projects using it was going parabolic, showing an excellent product-market fit.

The graph daily queries in 2020, source: The Graph, September 2020

With such an increase in transaction volume and the obvious costs to run such operations, I was wondering what was their business model to sustain such service.

Buy or Build decision

Software-as-a-Service (Saas), is a business model that we see everywhere in the software industry and it is pretty convenient for both parties: for the software provider it is a regular income and economy of scale can be achieved over the number of clients. On the other side for clients they save in time to market and they generally have a robust and maintained product for a fraction of the cost to develop it internally.

As an CTO or IT decision maker in any company, you are always in front of the "Buy or Build" decision.

Reasons for building products internally:

Fit virtually all requirements

Control over the evolution of the product

Control over uptime and SLAs

Lower (perceived) running cost

Reasons for buying products from third-parties:

Spread investment over time

Reduced time-to-market

Software battled tested and maintained by experts

Reduced lock-in (solution can be switched over to another provider)

I am personally convinced that unless there are very good strategic or financial reasons, if a product exists on the market the decision should always be a BUY over a BUILD.

In the example of The Graph, it is clear that they could have moved to a SaaS model and have a very successful product. Except they did not.

Distributed SaaS: the next evolution after dAPPs ?

Over the last year, in the Ethereum ecosystem we have seen an explosion of Distributed Applications (dAPP). Such dAPPs are in general nice web user interface wrapped over an Ethereum smart-contract. Because smart-contract are distributed, most developers of dAPPs do not even need a back-end, they only have a web front-end interacting with the smart-contract.

In comparison, after investigating the business model of The Graph, I would call this model a dSaaS: a distributed Software-as-a-Service.

How does it work? Instead of using a cloud provider to host their service and added more and more resources, The Graph has decentralized its infrastructure with a network of Indexers, Curators and Delegators. Indexers basically have the same role as the previous hosted service, except they chose which subgraph they are interested to index and they receive a fee per query using the native GRT token. Curators and Delegators are additional roles that help in making the network secure and scalable. You can read more on the roles in The Graph network documentation.

In essence, for a client (or consumer) running an application and wishing to use The Graph service, you would need to pay a small fee per transaction which is redistributed to the participant of the ecosystem. The cost of this per-transaction fee is not yet public, nor the details of the payment gateway but expect it to be a fix amount in USD that is converted in real-time to GRT using exchanges such as Uniswap, or any of the major exchanges where GRT has been listing on recently.

I find this model truly brilliant as it is a win-win for all actors of the ecosystem: consumers can expect a SaaS type of model and very likely to use and pay for it (BUY over BUILD) as building such system internally is tedious and expensive; participants in The Graph receive incomes; and The Graph foundation steered by The Graph council has financial means to improve the software and ecosystem.

The Graph activity dashboard, source: https://network.thegraph.com/

Conclusion

I believe The Graph is poised to be a must-have component in dAPP development, providing the necessary data enrichment and indexing from the smart-contracts exposed by a simpe API. In complement of other infrastructure tools like Ethereum smart-contracts for application logic, IPFS for application storage, web applications are now one step closer to be able to run without a server at all.

Beyond the technical solution itself, I find The Graph truly remarkable for paving the way of a new business model category for software. The team did a flawless mainnet launch involving VCs, community and crypto-exchanges. A few days after this launch, the associated GRT token has already achieved a fully diluted market capitalization of several billions dollars. And many memes.