We propose a draft for the evolution of The Graph Protocol. This proposal integrates insights from both the original Graph Protocol and the Graph Horizon evolution paradigm, to:
- Maintain the coherence and balance of the original protocol.
- Enhance incentives to directly align with the creation of consumer value.
- Sustain continuous improvements to network health, capability, and activity.
In line with The Graph’s vision to serve the World’s public data, information, and knowledge needs, we invite you to join the discussion to:
- Help us collectively shape and refine a shared target for the protocol’s evolution.
- Establish shared context for evaluating and aligning future protocol upgrade proposals.
- Ensure that our path forward benefits from the combined insights of our decentralized community.
This proposal is in draft mode, and we welcome engaged discussions to improve it.
GIP-0070: Evolving The Graph Protocol Economics (2024)
See formal proposal: GIP-0070: Evolving The Graph Protocol Economics (2024)
This post explains our motivation for protocol evolution to support discussion.
Contents
Introduction
This (still tentative) proposal has emerged from hours of discussion. I subjected The Graph experts to crazy thought experiments. Everyone I asked generously gave their time, eliminating many approaches in the process. There were paradoxes, apparent contradictions, and hard problems to solve.
Many crazy ideas were dead ends, but some were stepping stones to the next idea. The stepping stones navigated apparent paradigm clashes, to find complementary applications of those paradigms. The conclusions might seem deceptively simple in retrospect, perhaps even obvious. Many details are incomplete, but your involvement in the discussion is overdue.
The proposal has interdependent parts that need to be considered in combination. Some parts might initially not make sense. Sometimes I will need to provide a clearer explanation. Sometimes it will be hard to put current implementation aside to evaluate within the target context. Sometimes, as has repeatedly been the case, the proposal will evolve in response to new insight.
Context
The context for this proposal is that:
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The Graph Protocol holistically balances incentives: By identifying key participants and their interactions, integrated protocol mechanisms holistically balance incentives and nurture the network. This balance is critical to the overall success of The Graph.
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Graph Horizon created a paradigm shift: Graph Horizon both complemented and challenged the initial protocol design, emphasizing simple flexible modular components, permissionless creation of new data services, and direct agreements between producers and consumers.
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Network rewards are not linked to consumer value delivered: While incentives are globally balanced, it has become clear that local rewards (based on Indexing Rewards and Curation) do not always align with the actual value delivered to consumers. Following the completion of Sunrise, we need to focus on optimizing consumer value creation and evolving incentives to directly link rewards to the creation of that value.
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Supply of indexing is not well matched to consumer needs: The original protocol uses Curation signals to globally balance the supply of indexing with demand, but it does not optimally match local supply to consumer needs. While Indexing Payments introduce a mechanism for directly matching supply to consumer demand, this mechanism does not balance global supply.
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We need to plan for sustainable ongoing network innovation and growth.: Our protocol roadmap should pave the way to self-sustaining ongoing innovation and growth of The Graph.
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While upgrading the protocol we must maintain holistic coherence and balance: This applies to the target state of the protocol, to interim protocol states, and to the balancing of stakeholder interests. The holistic design of The Graph Protocol must be preserved to ensure the network remains balanced and healthy. As protocol evolution continues, it is essential to evaluate upgrades both as standalone mechanisms and as part of an interconnected system requiring holistic balance. The design of the protocol’s target state must address all these aspects, both individually and as part of an integrated whole.
The GIP-0058 proposal to introduce indexing fees generated valuable discussions. While there is broad consensus that the protocol must evolve, these proposals need to be evaluated within the broader context of the protocol’s target state.
There was a need for more clarity on how the embedded incentives, which nurture and globally balance the network, will evolve and be maintained. There is general agreement that Curation and Indexing Rewards should evolve, but without knowing the direction of this evolution, it was difficult to properly evaluate proposals.
After feedback, the GIP-0058 proposal was amended to avoid changes to Curation and Indexing Rewards. While this made the proposal acceptable in isolation, it left unanswered questions about how to complete and achieve a coherent protocol upgrade. (Note that GIP-0058 is expected to be withdrawn and superseded by GIP-0081 Indexing Payments.)
This proposal aims to shape our target state so that subsequent proposals can be evaluated within this context. Although presented at a high level, with many details still to be clarified, we hope to establish a consensus on the direction of the protocol’s evolution.
While details are pending, we aim to agree on the general direction, allowing us to productively discuss and iterate on:
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Elaborating the target state: We expect there will be areas of concern that need clarification and resolution before establishing consensus on the target state.
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Evaluating individual protocol upgrades: These upgrades should be understood within the context of, and aligned with the protocol’s target state.
These are complementary threads: individual protocol upgrades contribute to refining and evolving the overall target while also being evaluated within the context of the broader vision.
The 007X GIP range has been reserved to conveniently group related proposals, with GIP-0070 representing the high-level target state outlined in this introduction post.
We will explore protocol evolution in terms of:
- The Participant Needs to be met.
- The Design Principles used.
- The resulting Proposal Approach.
Note: The the terms data, information, and knowledge have different implications and are used in different contexts. Generally where one of these is used, for the purposes of protocol evolution the principles apply to all three. (While the difference between data, information, and knowledge are worth exploring; for this post that would be a distraction.)
Participant Needs
For each category of participant, we explore their needs from The Graph and how the protocol should evolve to meet those needs.
Consumers
Our mission is to serve the World’s public information, and our purpose is to meet consumer data needs. To do this effectively, it’s not enough for the data to be available—it must be accessible in ways that fully serve their needs, supported by tools that optimize their experience. We maximize the value of The Graph to consumers by providing the right data and information, at the right time, and in the right way to meet their needs.
Currently, the primary consumers of The Graph Network are application developers. We are actively working to improve their experience and better address their data needs, while also seeking to progressively expand the range of consumers served by the network. Meanwhile, the Knowledge Graph aims to organize the World’s public information for a far broader audience. The Graph Protocol should support meeting the public data, information, and knowledge needs of all these consumers.
Key considerations for satisfying consumer needs and optimizing their value:
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Conveniently matching individual consumer needs: Providing the best available match for each consumer’s specific requirements, alongside the right information and support to help them maximize value. (The right information, at the right time, in the right way.)
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Consumer payments are a tangible metric of value delivered: Payment for services is the most direct and measurable confirmation of value delivered to consumers.
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Enabling consumer contribution and role progression: The consumer experience is enhanced when consumers can also contribute value back to the network and potentially take on additional roles, increasing the value of the network for all participants.
- Consumers, especially expert users like developers, often create significant value when building solutions.
- Capturing and reusing this value for the benefit of other users enhances the overall network.
- If capturing reusable value is easy and incentivized, it benefits both the original consumer (as a contributor) and other users, thereby increasing the network’s value.
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Facilitating reuse to boost efficiency and value: Reuse of existing captured value (rather than duplication) improves network efficiency and consumer value. It also encourages collaborative improvement and maintenance, further enhancing consumer value. This can also improve accessibility, expand the consumer base, and thereby further increase network value for all participants.
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Expanding the value proposition to serve additional consumers: We should not limit our focus to our current consumer base or our current solutions. The protocol and ecosystem should evolve to better serve both existing and new consumers.
Providers (Indexers)
The service that The Graph Network provides is built upon, and depends on, the service provided by Indexers and other service providers. In general the term Indexer should be read to apply to any service provider as defined in GIP-0066 Graph Horizon.
The success and value of The Graph Network is less about the sheer number of Indexers and more about the breadth and quality of services they offer. High-quality Indexers are crucial to the network’s success, and we’ve been fortunate to attract, develop, and retain Indexers who are committed to improving their service levels. Their dedication and investment are the core decentralized foundation of our network and critical to delivering value to consumers.
For both Indexers and The Graph Network to thrive, two critical Indexer profiles must be facilitated, incentivized, and balanced:
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New Indexers joining the network: The health of The Graph Network relies on new Indexers being able to join, prove themselves, and transition into established Indexers.
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Established Indexers operating in the network: The network depends on experienced Indexers providing high-quality service to maintain the network’s efficiency and performance.
We will explore these profiles in more depth, starting with established Indexers and later focusing on new Indexers.
Established Indexers and Consumer Demand
As the network matures, Indexer income will increasingly depend on external consumers paying for service (typically to Gateways rather than directly to Indexers). Such income depends on:
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The value created and delivered to consumers: The more value we create for consumers, the more they will be willing to pay for services, thereby increasing Indexer income.
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How well individual consumers are matched to Indexers: Consumers need to be matched with Indexers that can provide the best value for their needs.
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The uniqueness of consumer value created by The Graph: This uniqueness enhances the competitive position of both the network and individual Indexers in comparison to other data sources.
Efficiency and Profitability of Indexers
The margins and profitability of Indexers will also increasingly depend on how efficiently they provide services. This efficiency is determined by:
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Efficient allocation of indexing resources: Indexing must be efficiently distributed to satisfy demand, minimizing unnecessary costs for Indexers.
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Accurate matching of Indexers to consumer needs: The better Indexers are matched to the needs of consumers, the more value they can deliver.
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Efficient use of GRT to provide services: Efficient management of resources, including GRT, will play a key role in maintaining profitability.
Additional Dependencies for Maximizing Income and Efficiency
Several additional factors will influence the success of Indexers:
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The overall quality of service provided by the network: High-quality service across the network will help maintain a positive reputation and attract more users.
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The reliability and trustworthiness of services and data: Consumers need to trust that the data and services they receive are accurate and reliable.
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The ease of permissionless entry for new Indexers: Entry into the network must remain permissionless, aligning with our decentralized principles of trustless operation. Additionally, it should be both technically and operationally as easy as possible, minimizing barriers to entry. This is critical for maintaining network diversity, scaling to meet growing demand, and fostering innovation.
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Opportunities for specialization: Indexers should have the chance to specialize and optimize their services for particular niches, improving efficiency and value.
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The effectiveness of The Graph in attracting and retaining users: The more users The Graph can attract and retain, the greater the demand for Indexer services.
Aligning Incentives with Value Delivery
The original protocol has been extremely successful in establishing a robust network with high-quality Indexers. However, it now requires tuning to align incentives more directly with consumer value. The protocol needs to support Indexers in efficiently maximizing their value to consumers. Incentives that are not aligned with value delivery are not beneficial for Indexers in the long term.
Under the original protocol, Indexers were expected to determine what indexing to perform based on Curation signals. However, with the transition to Sunrise and increasing demand, this approach no longer serves Indexers well for several reasons:
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Indexers are not well positioned to predict consumer demand.
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Curation signals are not reliable predictors of query demand for any particular Indexer.
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Curation signals do not facilitate the efficient allocation of indexing resources to match consumer demand.
Transition to a Demand-Driven Network
As external demand increases and becomes the primary source of Indexer income, Indexers will be better served by being efficiently matched to consumer needs and demand. This allows Indexers to focus on efficient provision of high-quality service.
The protocol needs to evolve to better support Indexers by allowing them to focus on their core task: delivering reliable, high-quality service. This includes:
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Permissionless entry: The easier it is to join the network and compete, the better for the overall health of the network. A mature understanding of this means acknowledging that we cannot guarantee Indexer profitability, but we can design the network to seek an equilibrium that attracts and sustains quality Indexers.
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Building reputation and relationships: Indexers should have opportunities to establish reputations, build service relationships, and fairly compete with other providers.
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Matching Indexers to useful work: Indexers should be matched to the work that maximizes the value of their services, allowing them to focus on excelling in service provision.
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Recognition and rewards for service excellence: Indexers providing excellent service should be recognized and rewarded accordingly, further incentivizing high-quality service provision.
Future Considerations
The original Indexing Rewards system served the network well during its early stages. However, as the network matures and becomes more demand-driven, Indexers will no longer be well-served by the current mechanisms. We must align incentives to focus on delivering real value to consumers and ensure that Indexers are rewarded based on their contribution to that value.
Gateways
Gateways play a crucial role in The Graph Network by conveniently matching supply of data to consumer needs. Their success depends on how effectively and conveniently they meet the needs of their customers.
The success of Gateways depends on:
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The health of The Graph Network: Gateways rely on the availability of high-quality Indexers to provide the services needed to fulfill consumer demand. The overall performance and reliability of the network are directly tied to the effectiveness of Gateways in delivering value to their customers.
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Efficiently incentivizing Indexers: Gateways must be able to incentivize Indexers to index and serve the data required to meet their consumer needs. This involves optimizing costs, maintaining high-quality service, and ensuring that Indexers are rewarded appropriately for the value they provide. The better these incentives are aligned for a Gateway’s consumers, the more effectively supply is matched to demand, the greater the value of the network is for all participants.
Contributors
The creation of value in The Graph Network goes beyond service provision by Indexers. While Indexers deliver value, that value is critically dependent on contributions from other participants. Subgraph developers are a prime example, but the scope of contribution should not be limited to subgraph creation.
The Graph operates as a public good, and the creation and management of subgraphs should be encouraged as a collective activity that benefits the entire ecosystem, rather than as siloed, single-use efforts. This collective approach aligns with the decentralized nature of the network and fosters continuous improvement through collaboration.
Key considerations for fostering contributor value creation:
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Shared public assets: Subgraphs and other data modules should be treated as shared public assets, accessible to all and improving with collective input.
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Diverse decentralized contribution: The network should incentivize a wide range of contributions from different roles, encouraging collaboration and rewarding valuable input, whether it’s through creating, improving, or maintaining subgraphs or other key components.
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Modular approach: A modular design allows contributors to build reusable components that can be easily combined or adapted, fostering innovation and efficiency across the network.
To grow the value creation potential of The Graph, the protocol needs to evolve to support a broader scope of contributors, more diverse roles, and enhanced incentivization for decentralized, collective efforts. This will help ensure that the network continues to operate as a public good while maintaining a healthy balance between value creation and delivery.
Delegators
Delegators play a critical role in The Graph Network. While delegation is not changing as part of this proposal, it’s helpful to briefly consider the broader personas that choose to be Delegators.
These personas vary, but include:
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Individuals who wanted to be involved in The Graph, with Delegation being the most attractive option for them.
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Delegators with differing risk appetites, including those who prefer to avoid the slashing risks associated with Horizon Delegation.
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Those who might lack the expertise or desire to conduct detailed diligence on Indexers.
Considering these broader personas, Delegators would be better served if:
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There are more ways to participate in The Graph without being direct providers or consumers of content or services.
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They could support The Graph without exposing their GRT principal to risk.
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They had opportunities to participate with a predictable reward for participation.
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They could help build network value in domains aligned with their own interests.
While we believe that Horizon Delegation is a solid model for delegation purposes, supporter personas would benefit from a broader range of ways to be involved with and support The Graph.
The evolution proposal seeks to broaden the nature of available participation opportunity by introducing:
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An upgraded Curator role that facilitates broader participation opportunity than is currently provided.
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An incentivized Sponsor model.
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Modularization of Delegation, Curation, and Sponsoring to support broader network value-building activities.
Although not the core focus of this proposal, it’s worth noting that these changes also support initiatives like the Knowledge Graph, which will leverage these models to create new ways for individuals to participate in and support The Graph Network.
Curators
Curators play a pivotal role in directing attention and resources within The Graph Network. Currently, Curation provides a signal that influences which subgraphs are indexed. It is proposed to upgrade Curation to provide both more direct influence and a broader scope in shaping network capabilities.
Key considerations for Curators include:
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Predictable influence on network development: Curators want to have a predictable and meaningful impact on the evolution of The Graph Network, ensuring that their efforts and commitment lead to tangible value creation.
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Direct rewards based on consumer value delivered: Curators should be directly rewarded based on consumer value realized as a result of their support. This ensures that rewards are proportionate to the value delivered to consumers, aligning incentives more closely with delivered value.
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Modular application of Curation: Curation should be based on a modular mechanism, applicable beyond just indexing to encompass other network capabilities and opportunities. This broader scope allows Curators to influence and support a wider range of activities within The Graph, creating more opportunities for engagement and value creation.
By implementing these changes, the network can better align Curator incentives with the broader goals of consumer value creation and network development. This also supports the evolution of a more flexible, scalable system that can adapt to the growing needs of The Graph ecosystem.
Sponsors
Any party that makes Indexing Payments is considered a Sponsor. Sponsors play an essential role in creating network capability, such as indexed data, to prepare the network to satisfy realtime consumer demand. To achieve this, Sponsor incentives must align with the delivery of consumer value.
Key considerations for Sponsors:
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Recognizing and defining the Sponsor role: A Sponsor is a party that pays for indexing or other network capability building using GRT. This can include Gateways acting on behalf of users, application developers, or any other participants who require network services.
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Incentivizing value contribution: Sponsor incentives should align with consumer value, ensuring that Sponsors receive rewards proportional to the consumer value delivered through their sponsorship.
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Balancing supply and demand: Sponsor incentives should help balance the supply of services like indexing with consumer demand, ensuring efficient and sustainable network operations.
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Broadening the scope of sponsorship: Sponsorship should extend beyond indexing to include other areas of network development and capability building. This should follow a modular approach that supports content creation in the Knowledge Graph and accommodates new use cases as they arise.
Sponsors are essential in aligning network supply with consumer demand, and their role should be clearly defined and incentivized based on the value they help create. As the network evolves, the scope of sponsorship should expand beyond indexing to support diverse network capabilities, ensuring continued growth and innovation within The Graph ecosystem.
Design Principles
These principles build upon the design principles of both the original protocol and Graph Horizon, focusing on resolving the initially incompatible incentive structures between the two. While Graph Horizon prioritized protocol efficiency, modular components, and local decision-making, the original protocol emphasized a globally coordinated incentive framework with direct payments for value creation.
These principles integrate the strengths of both approaches, recognizing the value of flexible, decentralized innovation while preserving holistic equilibrium.
- Synergistic open primitives, to can create an extendable ecosystem that encourages a wide range of contributions and applications.
- Consumer value alignment ensures that contributors are rewarded based on the tangible value they deliver, avoiding inefficiencies associated with low-value activities.
- Self-balancing markets dynamically adjust fees and match providers to consumer needs, efficiently maintaining both local flexibility and global equilibrium.
Applying these principles enables greater flexibility, innovation, and participation in the ecosystem while embedding incentives directly into standard payment flows. It combines the innovation and modularity of Graph Horizon with the structured incentive mechanisms of the original protocol, ensuring a balanced, sustainable ecosystem that can grow and evolve without sacrificing core efficiency or alignment with value creation.
Proposal Approach
The overall approach focuses on creating a coherent protocol upgrade that, based on the network’s operating principles, optimizes participation for consumer value creation. The themes of Maintain network balance, Enhance incentive alignment, and Sustain continuous improvement are more formally defined and expanded in GIP-0070: Evolving The Graph Protocol Economics (2024).
Maintain network balance
The existing Graph Protocol has a holistic design that identifies key participants, their interactions, and embeds incentives to nurture and globally balance the network. These established aspects, including the holistic and coherent nature of the protocol, are critical for the success of The Graph.
This approach has enabled The Graph Network to thrive, including the establishment of a critical network of high-quality Indexers who have invested significantly in infrastructure, knowledge, and operational capabilities. The Graph Network is not just a collection of protocols and technology components; it is a materialized decentralized network of participants.
Maintaining and enhancing this network is as important as upgrading the protocol itself.
The need for enhancements is widely acknowledged, but the challenge lies in ensuring a coherent upgrade that incorporates improvements from Graph Horizon while maintaining the established network balance.
To maintain network balance requires:
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Ensuring the continuity of issuance distribution to incentivize indexing.
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Maintaining a balanced and integrated incentive structure.
Enhance incentive alignment
The current protocol requires enhancements to better incentivize and reward quality of service. It is crucial to align incentives with consumer value, while enabling Indexers to focus on service provision rather than on predicting demand or selecting subgraphs to index.
Indexers should not be burdened with determining which subgraphs to index. Instead, they should focus on providing high-quality services, advertising their capabilities, and being selected based on those parameters. This ensures that indexing activities match actual demand, improving the likelihood of receiving queries and providing better value for both Indexers and consumers.
As consumer demand grows and query fees become a dominant source of network income, the effective matching of supply to demand will become increasingly important for both consumer satisfaction and Indexer profitability. The current protocol’s reliance on Indexers to forecast potential earnings based on indexing decisions has led to inefficiencies, such as excessive indexing of certain subgraphs and inadequate indexing of others.
Sustain continuous improvement
As The Graph transitions to a long-term operational model following the completion of Sunrise, ensuring continuous improvement is critical for the network’s continued success.
The network must foster ongoing innovation to support new use cases, encourage decentralized contributions, and ensure that the network remains adaptable. Growth should be driven by consumer demand, with participants rewarded for delivering value, enabling both scalability and the continuous evolution of The Graph ecosystem.
The network must also effectively and fairly balance the allocation of issuance as needs change.
Conclusion
We propose a vision for the evolution of The Graph Protocol that builds on the foundations of both the original protocol and the innovations introduced by Graph Horizon. By focusing on maintaining network balance, enhancing incentive alignment, and sustaining continuous improvement, we aim to create a more adaptable, efficient, and scalable ecosystem.
The proposed approach not only preserves the existing strengths of The Graph but also addresses current inefficiencies, ensuring that participants are better incentivized to contribute value and that the network can continue to evolve and support new use cases. As The Graph transitions to a long-term operational model, fostering ongoing value creation and innovation will be key to securing its future success.
We invite the community to join the discussion, help refine this vision, and shape the future of The Graph. Together, we can ensure the network remains resilient, decentralized, and primed for continued growth and innovation in the years to come.