What is an API? A Simple Explanation For Crypto Enthusiasts

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Application Programming interfaces (APIs for short) facilitate the transfer of data between systems billions of times a day and serve as key access points that connect businesses with customers, contractors, and employees. 

APIs should be understood as important tools for businesses. They streamline organizational processes and provide greater process efficiency and brand awareness, among other benefits, and reduce response time.

But what is an API? What does the acronym stand for and what types of programming interfaces are there? Our guide will tell you everything you need to know.

Definition of an API

With everyone now interested in cryptocurrencies and special features such as a Kraken trading bot, APIs have also reached the spotlight in 2022. As we said at the very beginning, API stands for Application Programming Interface. It is a set of protocols, commands, targets, and functions that programmers use to create software. They are also used to interact with an external system.

What an API does is give developers commands that can become basic, in order to perform common operations. This avoids having to write code from scratch.

As the name also carries the words programming interface, it allows applications to communicate with each other without problems. Do not think of it as a server or database, but as the codes that control the access points that enable communication. This means that data exchange between different systems is simplified and accelerated multiple times.

Meaning of API | Example

Imagine you are building something with Lego. Instead of having to make or carve a new brick every time, you can simply take a brick from a prepared assortment and insert it into your project. 

Each brick can be plugged together with other bricks, speeding up the building project. In essence, APIs work the same way. They optimize and increase efficiency wherever they are used.

API Explained with Application Examples

APIs are everywhere and most of us deal with them every day without realizing it. Every time we post an update on Facebook, compare airfares on a travel website or perform an online banking transaction on our smartphone, there are APIs behind it. 

In fact, most of us use hundreds, if not thousands, of APIs every day. The following three examples provide a good illustration of the different functions of APIs:

Weather Forecasting | Global Data Exchange Through Multiple APIs

To better understand the functionality and scope of APIs, let’s look at an example from the weather forecast. A company collects and stores weather data from millions of sources around the globe using numerous APIs. 

Other APIs allow the forecast developers to create the smartphone widget that users need to access the weather predictions. And still, other APIs ensure that files can be exchanged with the server via the smartphone: When you provide your location, you get a weather forecast in return.

In e-Commerce | Transferring Inventory Data in Real-Time

In e-commerce, retailers use APIs to keep track of their inventory and provide customers with information about product availability.

Service Providers | Simplifying Customer Contact

Medical service providers use APIs for their online sites where patients can make appointments or search for specific services. Government agencies use APIs to register voters and manage directories while nonprofits use APIs to connect with donors.

Using Cryptocurrencies | Interact with your Exchange Programmatically

A crypto exchange API is a service to interface with exchanges that deal with cryptocurrencies. What this API allows is to execute trades, receive data in real-time, pull data, and much more. Long story short, it allows developers or users of the service to interface with exchanges.

API | Origins, and Evolution

APIs have been around since 2000, and among the earliest and most well-known APIs are the two APIs that eBay and Salesforce introduced around that time:

  • eBay wanted to offer its users easier access to its site and facilitate mass uploads of listings.
  • Salesforce was looking for a solution that would allow more users to connect their existing data to their Salesforce platform.

Two years later, Amazon Web Services appeared on the scene. Since then, the number of APIs available has grown exponentially. But the number of APIs isn’t the only thing that has changed in recent years. With the development of open-source APIs and REST APIs, the rules have been rewritten – both for the Internet and for software development. The trend toward cloud-native technologies promises even more dramatic changes in the future.

What APIs Are There?

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Basically, there are three different types of APIs, the difference being their accessibility:

  • Internal API
  • Partner/Customer API
  • Public / Open-Source API

There are thousands of APIs in use today, and with each new software introduction or update, new ones are added. Some APIs are available to the public, while others are strictly internal or restricted to two or more partners. The three basic access types are explained below.

Internal API | Protected Access

Internal APIs, also called private APIs, are hidden from external users and are only exposed through internal systems. These non-public APIs are not intended for use outside the company, but rather for internal use – for example, to increase productivity. 

For example, they are used by companies to achieve greater efficiency in various areas, such as product development, human resources, and customer service.

Partner / Customer APIs | Restricted Access

Partner APIs are APIs that are provided to strategic business partners. They are available on a restricted basis – meaning, special authorization is required for access. Partner APIs are used to communicate across company boundaries. They are usually accessible via a public API developer portal.

Open-Source API | Publicly Accessible to Third Parties

An open-source API, also called a public API, is a programming interface that is made publicly available to software developers. Open APIs are published and freely shared on the Internet, allowing the owner of a network-accessible service to provide universal access to consumers.

APIs and API integration can be found everywhere: in every industry and every sector. Today, publicly available API options – known as open-source APIs – offer developers more flexibility as well as access to proprietary software and Web services. There are significant advantages to using open-source APIs for a business:

  • Open concept and agility: An open-source application integration solution is ideal for ensuring that the enterprise infrastructure remains flexible, future-proof, and not dependent on a single proprietary technology.
  • Data sharing and innovation: Rapid advances in computing power and the high availability of data have opened up new opportunities to derive clear business value from information. Increasingly, data is shared primarily through APIs.
  • Cost savings: An open-source solution to enterprise application integration needs is far less expensive than proprietary software, both in terms of upfront investment and ongoing costs.
  • Valuable insights: APIs provide more capabilities in terms of interactions and data collection. In this way, companies gain more insights into their customers and processes, and can better tailor their products and services to the individual needs of their users.
  • Community support: The developer communities around mature, active open source projects are an excellent source of know-how, tips, and application enhancements.

What Does an API Look Like?

APIs can differ in terms of their architecture type (REST, SOAP, RPC, etc.). Recent developments in the history of APIs include the emergence of the REST architecture and the trend toward cloud-based API design.

In recent years, the REST API has become the preferred standard for application development in this regard. REST APIs – short for Representational State Transfer – were developed and designed by Roy Fielding specifically for web services. In other words, they help computers and other devices communicate over the Internet.

Fast Evolution of APIs Due to Cloud & IoT

Further impacting API technology are trends toward cloud technology and the Internet of Things (IoT). Advances in programming, as well as in network speed and security, have allowed all API technology to evolve rapidly.

Every day, an unimaginable amount of data is created, searched, sold, bought, analyzed, and used. Much of this data comes from the IoT – the network of devices, garments, applications, vehicles, and components connected to the Internet. And as long as the IoT grows, so does the amount of data available.

Thanks to cloud storage, data warehouses, and data lakes, companies can create and manage virtually infinite data sets. APIs capture and manage this vast amount of data and help interpret it.

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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Rene Peters

Rene Peters

Rene Peters is editor-in-chief of CaptainAltcoin and is responsible for editorial planning and business development. After his training as an accountant, he studied diplomacy and economics and held various positions in one of the management consultancies and in couple of digital marketing agencies. He is particularly interested in the long-term implications of blockchain technology for politics, society and the economy.

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