Investing Filter

Table of Contents

What is Ocean Protocol(OCEAN) ?

Ocean is a decentralized protocol that connects data buyers and sellers. Ocean provides a marketplace where AI researchers who need data to train their models meet publishers with data.

Anyone can become data publisher by selling their database in ocean market, while preserving privacy and control. Whereas, consumers get access to database that was previously unavailable.

What role does OCEAN token play ?

Ocean token is the native currency of ocean marketplace. It acts as an incentive layer that coordinates actions of various actors in the AI, Blockchain and Bigdata ecosystem.

OCEAN is used for:

  • Unit of exchange: OCEAN is the underlying currency for all transactions in ocean ecosystem. All the services in ocean marketplace are priced in OCEAN tokens.
  • Governance: Ocean DAO governs funding of projects. OCEAN holders vote for the projects that they think will add the most value to ocean. The value of their vote is proportional to thier holding.
  • Staking: OCEAN holders can stake their token on a database they feel has the most potential. Stakers earn a cut of transaction fee, proportional to their stake.

Origin of Ocean Protocol

Bruce Pon and Trent McConaghy created ocean protocol in 2017.

Bruce Pon is the current CEO of the project. He is also the founder of BigchainDB and Avantalion Intl Consulting. From 2008 to 2013 he helped to build more than 18 banks in areas where people had no access to banking.

Trent McConaghy has over 20 years of experience in AI. He started working as AI professional in 1997 for the Canadian government. He is also the founder of ADA and Solido.

Ocean team released technical and business whitepaper in Feb 2018. They raised 26.8 million dollars in funding rounds in May 2019. The team launched ocean market and migrated to Etherium mainnet in 2020.

Presently project is supported by the Ocean Protocol Foundation, a non-profit based in Singapore, and OceanDAO, a decentralized autonomous organization (DAO).

What problems does it solve ?

AI algorithms need large amount of data to improve accuracy.  

This data may not always be available with the AI developer. It could be held with governments, companies or public. It is very difficult for the AI developer to find and buy data from them without a central marketplace. On the other hand companies, public and government are hesitant to share data because of privacy and compliance concerns. 

The current data marketplace is not efficient. Enterprises holding data do not monetize it by sharing it with AI startups.

There are very few companies like Facebook and Google that have access to both: data and AI. Most people do not know the value of their data and give it away to these companies. These corporations do not share the data but use it to target public with ads and mold their opinions.

AI developed by these companies keeps getting better as more and more data is gathered. They have monopoly over data which does not allow small startups to compete with them. 

Ocean aims to be the connecting substrate between data providers and data consumers. 

Companies will be able to monetize data, whereas AI startups will be able to build AI models to solve problems faced by the world.

Ocean marketplace will open the shadow data economy that was controlled by a handful of large corporations. It will create an open Web3 data economy where buyers and sellers could easily exchange data.

Ocen protocol provides a protected ecosystem where data providers will feel safe to share public as well as private data. Data consumers will use the marketplace to search and buy data.

Data is only required for training AI models. Data is useless after the AI model has been trained. Ocean protocol allows AI models to come to data and train instead of publishers having to share data.

This provides peace of mind, control and privacy to publishers. While buyers get access to private data that would not have been shared otherwise.

Ocean marketplace will provide a passive income stream to data publishers whose data was earlier sitting idle in some hard disk.

Scientists, researchers, data analysts will use ocean ecosystem to search long-tail data that did not have any market earlier.

AI has the potential to transform every sector of the economy. Ocean protocol will make the data available to develop such AI models.

You can check out how the projects are using data bought from ocean marketplace here.

How does it work ?

Ocean protocol is built on Etherium blockchain. OCEAN token is ERC 20 token. The team wants to build data economy which will be similar to token economy build by defi dApps.

Ocean team integrated existing tools like wallets, storage solutions and AI libraries in the ocean ecosystem.

Key players

Main participants in ocean economy are:

  • Publishers: They sell their data and services in ocean marketplace. They can decide to sell their services at a fixed rate or let the market determine prices. Publishers can sell their data as it is in raw format or refine it further to sell it at a higher price.
  • Consumers: They purchase data and services from publishers.
  • Stakers: They stake their ocean tokens on service/data they feel has the most potential. They earn a cut from transaction fees every time service/data is bought. Consumers can also use staking as a signal to judge quality of dataset(Stakers will only stake on those datasets they feel will have maximum future demand).
  • Keepers: They run ocean nodes that keep the ecosystem running.

Datatokens

Publishers can host their data on any storage solution like Amazon AWS, IPFS or their own PC. However, they have to list it on ocean marketplace to make it accessible to buyers.

Publishers have to fill out basic information to list their dataset on ocean marketplace:

  • Name of dataset
  • Name of author
  • Copyright holder
  • Pricing details: fixed-price or dynamic price
  • Access type: Time-bound(for example access for 24 hours) or compute to data(will be discussed subsequently)
  • Sample data
  • Link to access actual data

Each dataset gets its own unique ERC 20 data token. Holder of this unique data token is allowed to access the database. Consumers buy data token for the database they want to access from the ocean marketplace.

Publisher can choose to set a fix price of datatoken or let the market decide its fair value.

  • Fix price: Publisher specifies a fix price. Buyers can choose to buy or not at the set price.
  • Dynamic price: Publishers may not be able to price their data as they cannot anticipate the market demand in advance. They can choose to set price dynamically based on market supply and demand. Ocean protocol uses AMM(Automatic market maker) algorithms to discover the price of dataset.

Stakers can also add their OCEAN token to AMM pool and earn a transaction fee every time the data token is purchased. In this case, publisher keeps all the tokens from sale, however the transaction fee is divided among stakers for providing liquidity.

Compute-to-data

Most buyers need access data to train their AI models. The data is of no use to them once their AI model has been trained. On the other hand, publisher may not want to give a copy of actual data because:

  • Data may contain private information.
  • Buyers can resell the data.

Ocean protocol solves the problem by allowing AI models to come to data to train instead of data leaving secure premises of publisher. This allows publisher to sell their data without the risk of exposing it.

Here is a tutorial showing steps to train your AI model using compute-to-data.

Ocean marketplace

At ocean marketplace:

  • Publishers: List their services and data.
  • Buyers: Search and buy data.
  • Stakers: Search and add liquidity to data/service they feel has the maximum potential.

You can check out ocean marketplace here.

Here is a demo of ocean marketplace: 

Code for ocean marketplace is open-source. Ocean team encourages developers to fork the code and make marketplaces for specific niche like healthcare, agriculture etc.

A small portion (typically 0.3%) of each sale goes to the developers running the marketplace.

How the process works ?

I will explain how the complete process looks like taking a typical hospital as an example:

  • Till now, the hospital had been collecting and storing data in a central database. It realizes that it could monetize its data by selling it on ocean marketplace without losing control and privacy.
  • The hospital lists its database on ocean marketplace.
  • A new AI startup wants to train its AI model on historical medical data to predict onset of chronic diseases as soon as possible. This could help doctors to treat the disease in its early stage.
  • The startup searches ocean marketplace for databases to train their AI model.
  • They come across the database listed by the hospital to train their AI model.
  • The startup purchases the data token that gives them access to the database.
  • Startup trains their AI on the database using compute-to data(actual data is not shared with the startup)
  • The startup sells its services: early detection of chronic disease in the open market that saves lives.

This is not just a hypothetical example, connected life is doing it since 2019.

How to earn the token

Various means to earn OCEAN token are:

  • Sell data: Publisher having data can sell it on ocean marketplace.
  • Sell services: Data scientists can buy raw data from market place, clean it, label it and resell it at a higher price. They can even sell AI models trained on the database.
  • Stake: Data scientists have relevant skills to judge quality of database and its future potential. They can train AI model on data to check its accuracy. If the data is of good quality, they can stake their OCEAN tokens to earn a portion of transaction fee every time the database is sold.
  • Build marketplace: Developers can fork opensource code of ocean marketplace to make a niche market. Developers running marketplace earn a portion of transaction fee for every sale.
  • Keeper: They run ocean nodes that keep the network running. Keepers are compensated in OCEAN token for providing services.

Governance model

Ocean team maintains code base for ocean protocol and ocean market. However, Ocean DAO controls funding of projects proposed by the community.

 Teams submit their proposal and costs involved to ocean DAO. OCEAN token holders vote whether to fund the project. The weight of vote is based on OCEAN holdings.

The proposals with the highest votes receive grants. The team uses the grants to implement the project. You can check out the latest proposals here.

Ocean team does not have any plans for governance DAO. The team is free to make changes to ocean protocol. This makes ocean team a single point of failure in terms of:

  • Government regulations
  • Differences in the team
  • Team is not bound by any legal contract to keep its word.

Competitors

There are many companies that provide data for training AI models, for example:

However, none of them have any crypto token or use blockchain as backbone infrastructure.

Future plans

The team behind ocean protocol continues to improve the software and services at all levels: smart contracts, libraries, and marketplaces/applications. They have made their roadmap public.

You can check out their roadmap here.

How much money does ocean team have for future development ?

Ocean protocol foundation raised 26.8 million dollars by selling 160 million OCEAN tokens(approx 15% of total supply) in 2019.

A small portion(typically 0.3%) of every sale goes to ocean fund. Ocean DAO uses this fund to sponsor projects proposed by community.

Tailwinds

  • First mover advantage: Ocean protocol is building core infrastucture for AI and big data using blockchains. They are first to the market and do not have any significant competitor.
  • Collaborations: They are collaborating with best crypto projects and enterprises to improve their services.
  • Network effects: More buyers will attract more sellers and vice-versa. This will start a chain reaction leading to explosive growth.

Challeges

OCEAN is an ERC 20 token. Ocean protocol is built on Ethereum. Ethereum has limited block space, which makes it difficult and expensive to scale. Etherium has high gas fees, which discourages buyers.

Ocean team has two options:

  • Migrate to some other blockchain.
  • Wait for Etherium to solve these issues.

Tokenomics

Ocean protocol has max supply of 1.41 billion OCEAN tokens. The tokens were distributed in 2019 as follows:

  • Founders: Ocean team received 20% of the total supply.
  • Acquirers: The team raised 26.7 million dollars to fund initial development by selling 15% of total supply to public.
  • Foundation: 5% of the total supply was reserved for ocean foundation. Ocean foundation will use it to fund projects proposed by ocean community,
  • Block reward: 60% of the OCEAN tokens will be distributed to keepers as block reward over the next 50 years.

Vesting schedule

lockup period for various actors is:

  • Founders: 5 years from project start.
  • Seed and Pre-Launch investors: 1 year and 6 months linear vesting respectively from network launch in Q1/2019.

Token Inflation

Keepers are rewarded for their services. Ocean has kept 60% of tokens aside that will be distributed to keepers over the next 50 years.

However, the amount of reward will reduce exponentially with time: inflation will reduce drastically every year.

Ocean protocol has hard cap of 1.41 billion tokens. After 50 years inflation rate of ocean will become zero once all the tokens have been distributed.

Demand pressure

Token’s price increases due to demand pressure.

Demand pressure on OCEAN token will come from:

  • Buyers: OCEAN is the native currency of ocean marketplace. Buyers will procure OCEAN to buy data/services from ocean marketplace.
  • Stakers: Stakers will buy OCEAN tokens and stake on datasets they feel has maximum potential.
  • Speculators: Speculators will acquire tokens in hope of price appreciation.

Supply pressure

Supply pressure on a token decreases its price.

Supply pressure on OCEAN will come from:

  • Publishers: They will sell their services for OCEAN tokens. However, many of them will choose to convert their holdings to fiat.
  • Market developers: Developers of marketplace get a small share of every sale. Some of them will sell earned OCEAN tokens.
  • Keepers: Keepers are rewarded with OCEAN tokens for providing their services. They also have the option to cash out their earnings.
  • Initial Investors: They have already made a handsome profit. Some of them will sell their holdings to lock in gains.

Market cap

Artificial intelligence is a multitrillion-dollar market growing at an exponential rate.

Ocean token has tremendous room to grow even if it can capture a small portion of the market.

Indicators to watch out for

  • Google trends: Interest in “artificial intelligence” is growing.
  • Google trends: More people are searching to “buy data” online.
  • Google trends: More people are searching to “sell data” online.
  • Number of AI papers being publisher is growing exponentially.
  • More companies are looking for AI experts.
  • Amount of data generated is growing.
  • YouTube: Subscribers and views of ocean protocol channel are growing.
  • Twitter: Their Twitter following is growing.

Ocean protocol and overall market is growing at an exponential rate.

Future possibilities

Some favorable future scenarios for ocean protocol are:

  • Data as an asset class: Companies will start treating data as an asset. They will list data as an asset in their balance sheet. Many will choose to sell their data and use it as a passive income source.
  • Stake on database: Companies like Facebook and Google are valuable because they have enormous amounts of data. Many investors will choose to stake on their database instead of buying shares of the company.
  • Users will pool their data and sell on ocean marketplace: Startups will release apps that help users to pool and monetize their data. For example, a startup can develop an app that allows drivers to install cameras in their vehicles and sell data to autonomous car manufacturing companies to improve their AI models.
  • Universal basic income: It may be possible a person is able to live off just by selling his data:
    • Driving data
    • Browsing activity
    • Prefrences etc

This is better than governments proposing to give free money to everyone – which only results in inflation. Every human is valuable. Sharing data that only a human can generate is one way to unlock the value.

Final remarks

People started renting spare rooms to complete strangers using Airbnb. Uber allowed unknown people to share rides. Ocean has the potential to open up a whole new data economy, if it is able to gain trust of users. Publishers will start selling their data once they are sure that they will remain in control and their data will not be exposed without their permission.

Ocean protocol solves the problem of lack of data for developing AI models. It is even possible that ocean protocol plays an important role in AI reaching singularity in a much shorter timeframe.

Do further research

You can continue your research by using following resources:

Further reading