Finance

Explanation of Ocean Finance

Ocean Tokens

Ocean Tokens are the main tokens of the network. The Foundation denote Ocean Tokens as “Ọ​ ” or with ticker symbol OCEAN. They are used in several ways.

First, Ocean Tokens are used as a ​unit of exchange​ for buying and selling data/services. A marketplace would price data/services in Ocean Tokens (OCEAN), or any other currency of the marketplace’s or vendor’s choice, such as USD, EUR, ETH, or DAI. It the latter, the marketplace would use a crypto exchange to convert just-in-time to OCEAN. Therefore, the Ocean network would only see OCEAN. The Foundation explicitly chose a one-token design over two-token design for simplicity, and to help equalize the access to upside opportunities of owning assets.

Second, Ocean Tokens are used for ​staking .​ This includes staking in each given dataset/service, and introduce a long tail of additional tokens called ​drops.​ Drops are derivative tokens of Ocean tokens denoted in “Ḍ​ ”. Each dataset would have its own derivative token. For example, 100 drops of stake in dataset X is “100 Ḍ​ X”. Drops relate to Ocean Tokens via curation markets’ bonding curves, which determine the exchange rates between them for different dataset/services.

Finally, Ocean Tokens are used in dispensing ​network rewards​, according to Ocean’s inflation schedule.

Stakeholders

Understanding network stakeholders is a precursor to system design. ​Table below outlines the stakeholder roles participating in the network. There are roles beyond, from developers to auditors.

Network Rewards to Incentivize Relevant Data/Services & Make It Available

Here is the ideal allocation approach, i.e. the approach assuming no computational constraints. Rij is the network rewards for actor ​i​ on dataset/service ​j​, ​before b​ eing normalized across all actors and datasets/services. The actual network rewards received are normalized: Rij,no

where,

Sij =​ actor​ i’s​ stake in dataset/service ​j​, measured in ​drops.​

Dj = number of deliveries of dataset/service ​j ​in the block interval

Ri = global ratio for actor ​i s​ erving up vs. accessing a dataset; details are below

T =total Ocean Tokens given during the block interval according to the over all token reward schedule (see Appendix)

The third term, Ri , is to mitigate one particular attack vector ​for data​. (It’s excluded for services.) “Sybil downloading” where actors download files repeatedly to increase their network rewards (more on this later). It uses a tit-for-tat approach like BitTorrent by measuring how much data an actor has served up, versus how much is accessed, as follows:

Ri = {min(B served,i / B downloaded,i, 1.0) if all data assets served; 0.0 otherwise}

where,

Bserved,i = total number of bits that actor ​i​ served (made available) across all data assets they have staked

B downloaded,i = total number of bits that actor ​i​ accessed, from any data assets

Circulating Token Supply

The circulating supply will be comprised of Ocean Tokens allotted to Acquirors, the Foundation, the founding teams and the network reward.

Early Acquirors in the Seed and Pre-Launch, and the founding teams have lock-ups ranging from 1.5–5 years.

Token Emissions with a 50 Year Timeframe

In the initial phase, the vast majority of tokens emitted will come from pre-mined tokens for Acquirors, the Foundation and the founding teams. From Q3/2022, the increase in Ocean Token supply will come solely from the network reward.

Token Emissions with a 12 Year Timeframe

Network Reward

To implement the network rewards as described above has complexity and high compute cost because, for each network rewards cycle, Ocean Protocol need to compute the amount of stake for each dataset/service made available by each actor, and Ocean Protocol would need a transaction to ​each ​actor to reward their effort.

The Foundation can address these issues by giving keepers the same ​expected ​value of network reward (though higher variance), with less computation using a Bitcoin-style strategy (called “probabilistic micro- payments”​). In Bitcoin, every ten minutes, tokens (Bitcoins) are awarded to a single k​eeper (miner) where the probability of reward is proportional to value added (miner hash rate), compared to the rest of the network’s value added (network hash rate = network difficulty). Network difficulty is updated every two weeks.

Ocean is similar. Rather than rewarding at fixed time intervals, every time a keeper makes a dataset/service available to a consumer, Ocean randomly chooses whether to give network rewards. The amount awarded is based on the value added by the keeper Rij and total network value added.

Rdifficulty is the network difficulty; it gets updated every two weeks (20160 minutes)6, i.e. the difficulty interval. Rrecent is the value added since the last difficulty update.

At network launch, Rdifficulty = 0. At the beginning of each difficulty interval, Rrecent = 0 . Here’s what happens when actor ​i​ makes a dataset/service ​j a​vailable to a consumer.

1. Compute value added:

Rij = log10(Sij ) * log10(Dj ) * Ri 7 2. Update total recent network value added: Rrecent = Rrecent + Rij

3. Compute the probability of getting a network reward, ​P.​ If we wanted one reward on average every two weeks, it would be (1). But let’s have rewards every 1 minute on average. 20160 minutes is two weeks. So, we add in the factor (20160 minutes)/(1 minute). The result is (2).

(1) P = Rij Rdif f iculty

(2) P = Rij *20160/1 Rdifficulty

4. Compute whether actor ​i​ gets the reward:

u ∼ U[0,1], i.e. draw a random real number between 0.0 and 1.0

If u ≥ P then actor ​i w​ill get the reward

5. If the actor ​i i​s to get the reward, then compute reward and give it, via a transaction with output to actor i. Since step 3 has a bias to reward more often using the factor (20160/1), here we need to divide the amount awarded by that same factor. We arrive at ​F,​ the fraction of rewards for this action in this difficulty interval. To compute reward , we scale ​F ​by T dif f iculty , where T dif f iculty is the total Ocean Tokens given during the two week difficulty period according to the overall token reward schedule (see Appendix).

F= Rij / ( Rdifficulty *20160/1)

reward = F * Tdifficulty

Once every difficulty interval (two weeks), the difficulty will be updated with ​R​recent.​ The change is limited to 0.5x to 2.0x of the previous difficulty value.

Rdifficulty = max(0.5 * Rdifficulty, min(2.0 * Rdifficulty), Rrecent)

Staking

When users are allowed to invest a currency in a data item, the level of granularity increases dramatically, while also adding an extra incentive: the risk of losing that currency. While most curation mechanics offer a “nothing to lose, nothing to gain” approach, the aspect of stake changes that. This does not necessarily imply a financial dimension. Stake could just as well be reputation points or network credits with a utility value. The items that carry the most stake with them, ought to be of the highest quality.

Curation Markets with Bonding Curves: users can invest in a data asset by buying tokens of that asset, with the hope that their shares will increase. Many variations on curation markets are possible, but deployment can be gas expensive. On-chain is particularly meaningful when dealing with financial incentives.

Bonding Curves

A ​bonding curve​ relates a token’s drops “Ḍ​ ” to Ocean Tokens “Ọ​ ” for a given dataset/service. ​Figure below​ shows a bonding curve for dataset X. It relates the ​price in Ọ​ to buy more drops of X​ (y-axis) as a function of the ​current supply of drops ​(x-axis). As people stake more interest in X, its ḌX supply goes up according to the bonding curve.

Bonding curves can take whatever shape the creator wishes. But to reward early adopters, a bonding curve typically makes it more expensive to buy ḌX as more people stake in it; this is the positive slope in the curve.

Bonding curve for Ḍ​X

A new curation market is initialized each time a new dataset or service is made available. With this, the actor has already staked Ọ​ to have the dataset or service vetted. A later section describes vetting. Once vetted, this stake goes into the curation market, in return for drops as to a measure stake. ​Figure below​ illustrates. We’re at the far left of the bonding curve because 0 ḌX have been generated. There, each ḌX costs 0.1 Ọ. If the initial user staked 50 ​Ọ, she would gain 50 Ọ​ / 0.1 ​Ọ/ḌX = 500 ḌX. The supply for ḌX increases from 0 to 500.

increasing supply to 500 ​ḌX

From here on, anyone can stake further in X. Let’s say a user wants to purchase 500 ḌX by staking more Ọ​ tokens. This would make the supply go from 500 ḌX to 1000 ḌX. In that range, the price is (0.1 + 0.2 ​Ọ/ḌX)/2 = 0.15 Ọ/ḌX. The user would get 500 ḌX for a total cost of 500 ḌX * 0.15 ḌX/Ọ = 75 ​Ọ.

increasing supply to 1000 Ḍ​X

What Happened with the IEO?

What happened?

On Friday, May 3, at 1600 GMT, the Ocean Token Contract unlocked. Ocean did this to push through 459 transactions to token holders and allow for deposits into Bittrex accounts. Unfortunately, the process was poorly communicated causing confusion for many wishing to move tokens into Bittrex International. Ocean Team apologizes for this.

In the meantime, people started moving Ocean Tokens to Bilaxy and started trading. Since the token contract is public and accessible, anyone can choose to list Ocean — Bilaxy decided to without communicating with Ocean Protocol. The token price held for a moment above $0.12 but there were more people that wanted to sell than buy. Once the spark was lit, the token price fell quickly to $0.08.

Ocean Token movements into Bilaxy on Friday, May 3

How did it happen?

There was no price manipulation or conspiracy to dump. Instead, there was a chain reaction sparked by weak demand that spiralled increasingly downwards as people panic sold until the panic ended.

In the first day, 94m Ocean Tokens went into motion representing 30% of the total token supply. These tokens came from multiple sources including Bittrex International IEO (56.4m), Coinlist ICO (16m), Pre-Launch (93m), Seed (8m), Foundation (47m), Founding Teams (94m) — totalling 314m.

At the maximum period of trading, 79m tokens were on Bittrex International and Bilaxy, and of these no more than 20m on offer at any single moment in time.

Below is a breakdown of the movement of Ocean Tokens on Friday May 3 by group:

Ocean Tokens by Group — along with the Percentage in-motion on Day 1 (Friday, May 3)

Several large movements of tokens did not go to Bittrex International or Bilaxy, but to OTC services which kept tokens out of circulation for trading.

The largest movement of tokens came from the Pre-Launch cohort where 24% (22m) of tokens shifted, which added to the existing 56.4m already in the Bittrex International platform. A smaller portion of ICO and Seed tokens also moved but not in meaningful quantities.

Ocean wrote that there had been no dumping and no selling from the Foundation.

How will the ICO/ IEO funds be used?

The Foundation is working on a transparency report to show the community how funds have been used and to give quarterly updates on progress. This will be coming out soon.

To give a quick preview, the Foundation has the role to activate a Data Economy with the funds raised and token treasury. Funds raised are issued to service providers for software, business development, legal, security and community efforts. Both BigchainDB and NewtonCircus (DEX) have signed agreements to deliver certain components in exchange for a transfer of funds. Ocean also have service providers such as Dentons, KPMG, Holland & Knight, Trail of Bits, CertiK, Bittrex International, Coinlist and many others that provide a host of legal, audit, and compliance services.

What future activities are planned?

The developer team will continue to build the protocol and network so that the community and enterprises will adopt it. Also it will continue to focus on creating value for its users and will give regular updates via Meetups, AMAs and in Telegram.

Coming up, Ocean Protocol will: