Most recent update: [June 26, 2023]
What is Ocean Protocol (OCEAN)?
In our age of the internet, digitized information and the commercialization of this data has become an increasingly valuable asset class. Ocean Protocol is built to make these processes more secure and efficient, allowing individuals and businesses to take control of their data, creating value and monetizing it by transforming it into a token.
Built using Ethereum, Ocean uses ‘datatokens,’ ERC-20 tokens that gate access to data. These tokens are redeemable by users that need information stored within them. Data providers can sell data access to interested parties on the Ocean marketplace while enjoying the security and provenance benefits assured by the blockchain. This means that, since practically anyone can convert their data into a token, Ocean Protocol has the potential to support a huge data marketplace.
Analysts, researchers, scientists, and other interested consumers can find great benefit from the plethora of data that exists on Ocean that may have been otherwise too difficult to acquire or, most importantly, too expensive. In particular, Ocean benefits data-intensive industries like AI development, which its core team has had significant experience in dealing with.
OCEAN is the network’s primary token and is the method of exchange on the Ocean Protocol network. It is used for community governance as well as staking for staking on data, and is given to data providers as a reward for their service on the blockchain.
The team
Created in 2017 by the founder of BigChainDB, Bruce Pon and AI expert, Trent McConaghy, the goal of Ocean was to take back control of big data from companies like Apple, Google, and Microsoft, and instead allow it to be shared and monetized freely on an exchange. Owners would no longer have to give control of their data or compromise its security in order to profit from it. To bolster the team, they hired many professionals with experience in AI, blockchain, and big data, as well as policy and business experts.
Ocean Protocol launched the OCEAN token in November 2017 alongside the marketplace framework that detailed the attributes and components necessary to deploy the decentralized Ocean Protocol data exchange. In March 2020, the team had the resources to launch the decentralized marketplace that was highly customizable for data providers.
The project is supported by the Ocean Protocol Foundation, a non-profit based out of Singapore, and OceanDAO, the eponymous DAO of the organization.
Function and characteristics
The project offers access to a broad data environment with open-source software, including the Keeper blockchain client, Parity SecretStore, and Aquarius metadata management. This opens a variety of paths for developers seeking to develop their own Ocean network.
Datatokens
Primarily, Ocean Protocol relies on datatokens to fulfill the operations of the protocol. Each dataset and data service on Ocean has its own ERC-20 datatoken that monetizes the data provided. Once you have purchased a datatoken on the marketplace, it grants you access to those specific data sets and services, like other ERC-20 tokens, datatokens can be held in most Ethereum-supported wallets. It is important to note, however, that the actual data does need to exist on the blockchain, rather, only access to its control does.
By spending a datatoken, it grants a user access to the data for a predetermined amount of time or even be granted compute-to-data access for individuals that need to run computing jobs on the dataset, the latter function is especially useful for training AI models. Compute-to-data generally involves running an algorithm over the dataset itself, rather than sending the data off-platform to be tested on externally – this preserves data security while still allowing third parties to benefit from the data.
The Ocean Market
There are currently two main Ocean Protocol functions: the Data Ecosystem Platform and the Data Marketplace. The Ecosystem Platform facilitates data access control and allows data providers to upload and store their data without sacrificing control when monetizing it for buyers. The platform thus includes the backbone of the network, including the Ocean chain, the smart contracts, and software development kits.
The Ocean Market, on the other hand, is an automated market maker (AMM) that facilitates the minting and exchange of datatokens; in a way it functions like a decentralized exchange. In contrast to the traditional ‘order book’ style trading seen on traditional exchanges, AMMs use a collection of liquidity pools (much like Uniswap) that allow each trade to settle through sets of smart contracts.
When a provider wants to mint a token, they specify several fields that inform the consumer of their data; this would include a title, a description, the price, and the URL where the data can be found, this is then all encrypted through Ethereum. The datatoken then must go through a process of price discovery; the provider can either set a fixed price for the token or allow the AMM mechanism to figure out the price for them. When consumers decide to redeem the token, the data is then decrypted and downloadable right through the wallet connected to the marketplace. Sellers keep nearly all the proceeds of the sale, with a small portion (about 0.3%) divided equally among stakers, the marketplace itself, as well as the Ocean community.
Supply and incentive
In terms of supply, there is a fixed maximum of 1.41 billion tokens. It is estimated it’ll take 50 years for the full supply to be released, with 600 million expected to be in circulation by May 2022, and 1 billion tokens by January 2031.
Like many tokens, one of the primary incentive models is through engagement within the coin’s ecosystem. Stakers on Ocean operate much like liquidity providers; once a token holder has staked for a particular dataset, they become a liquidity provider for a specific OCEAN-dataset pool, and they earn a percentage of the exchange fees that the pool generates. The default fee is set to 0.01%, but this can be changed by the data provider.
The OceanDAO, the network’s eponymous DAO, was launched in November 2020 as a community-led grants proposal system. OceanDAO allows OCEAN holders to participate in voting to decide which Ocean community projects and developments should receive grant funding.
Security
As an ERC-20 token, it is backed by Ethereum’s proof-of-work (PoW) mining and node network, whose extensive security measure protects it from a variety of attacks. Ocean had previously operated on a proof-of-authority (PoA) sidechain, but this was forgone to ensure that the datatokens remained compatible with the broader Ethereum ecosystem, like many other Ethereum-based projects. However, Ocean is adversely affected by gas fees, which could lead to pricey transactions during high-traffic periods.
Future
Ocean Protocol operates within a unique sector of the cryptocurrency industry, trying to bring one of the most monopolized areas of the modern internet back into the hands of the individual and the business. It strives to connect the multi-billion-dollar big data industry with decentralized finance and, using its unique data tokenization model, it will allow data providers to effectively monetize their data while still retaining privacy and control, two important aspects that are often lost when dealing with a larger company.
Current plans for Ocean include the funding the Ecosystem Development Fund, which is intended to help developers build projects with Ocean. 20 million Ocean Tokens have been allocated to this fund, held for developers, startups, and service providers building projects on the network.
Risks and Drawbacks
The primary drawback, at least for the foreseeable future, is that OCEAN users on other networks will not have access to the protocol’s utility as it solely focused on Ethereum. The Ethereum network’s scalability issues will also limit the protocol as well, at least until Ethereum 2.0. This means that transactions performed during high-volume periods on Ethereum are also going to be subject to gas fees, often times considerably and for simple actions such as transferring the token from wallet-to-wallet.
Further reading
If you would like to learn more about Ocean Protocol and its data marketplace, check out these resources below:
Ocean Protocol on Kraken: https://www.kraken.com/en-gb/learn/what-is-ocean-protocol
Ocean Protocol on CoinMarketCap: https://coinmarketcap.com/currencies/ocean-protocol/
Ocean Protocol on Moralis Academy: https://coinmarketcap.com/currencies/ocean-protocol/
Ocean Protocol on Gemini’s Cryptopedia: https://www.gemini.com/cryptopedia/ocean-protocol-web-3-0-ocean-market-ocean-token
Ocean Protocol on BitcoinSuisse: https://www.bitcoinsuisse.com/fundamentals/what-is-ocean-protocol
Due Diligence
Prior to listing Ocean Protocol on the VirgoCX Platform, VirgoCX performed due diligence on Ocean Protocol and determined that Ocean Protocol is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis including reviewing publicly available information on the following:
- The creation, governance, and location of Ocean Protocol and/or its primary development team;
- The supply, demand, maturity and liquidity of Ocean Protocol; and
- Legal and regulatory risks associated with Ocean Protocol.
Statutory Rights under Securities Legislation
VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30, 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada, do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Comments
0 comments
Please sign in to leave a comment.