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Ocean Protocol (OCEAN): Decentralized Data as an Asset

Ocean Protocol is leveraging blockchain technology to monetize data services.

By Cryptopedia Staff

Updated October 13, 20235 min read

Ocean Protocol- Decentralized Data as an Asset

Summary

Ocean Protocol connects data providers and data consumers in a blockchain-based marketplace. Its innovative model relies on tokenizing datasets and data services so that data providers can easily and efficiently monetize their data, and consumers have access to an ecosystem of valuable data in one convenient place. Data providers create ERC-20 tokens called datatokens that provide access to data that can be purchased with OCEAN tokens, Ocean Protocol’s medium of exchange that is also used to provide staking rewards.

Introduction to Ocean Protocol

Data and information are the fuel of the internet age, but processes for harnessing the value of data remain underdeveloped. Founded in 2017, Ocean Protocol is a platform built to solve this problem by monetizing data as a financial asset. The Ocean Protocol model is predicated on the tokenization of data. On Ocean Protocol, datasets and data services are tokenized into ERC-20 assets that exist on the Ethereum blockchain. Data providers can sell data access to interested parties on Ocean’s data marketplace, while enjoying the enhanced security and provenance benefits assured by blockchain technology.

Ocean’s unique approach to data tokenization enables individuals and businesses to monetize data in a secure and efficient manner. By allowing practically anyone with desirable data to tokenize and make it available, Ocean Protocol supports a huge data marketplace. Data analysts, researchers, scientists, and other interested consumers can benefit from the plethora of data that exists on Ocean Protocol that might otherwise be more difficult or expensive to acquire. Ocean’s data marketplaces offer a particular benefit for data-intensive industries like artificial intelligence (AI), which is a particular field of relevance for the project, as its core team has extensive experience in big data and AI.

Ocean Protocol’s native utility token, OCEAN, is the platform’s basic unit of exchange, and is used for community governance as well as for staking on data. There is a hard cap of 1.41 billion OCEAN tokens, with approximately 426 million in circulation as of April 2021.

Ocean Protocol’s Datatokens

Datatokens are the cornerstone of the Ocean Protocol platform and marketplace. Each dataset and data service on Ocean gets its own datatoken — a specific ERC-20 token that lets data providers monetize the data in question. By purchasing a particular datatoken on the Ocean marketplace, you gain access to particular datasets and data services. To access the data, you simply send one datatoken to the relevant data provider. Just like other ERC-20 tokens, datatokens can be held in most wallets with ERC-20 support. However, it’s important to note that the actual data itself does not need to exist on the blockchain — only the access control does.

By spending datatokens, you may be granted access to the data for a predetermined time, or compute-to-data access where you may run compute jobs on the dataset — which is a popular means of training AI models. Compute-to-data is characterized by running an algorithm over the dataset itself, rather than sending the data off-platform to where an algorithm runs. This is done to preserve data security while still allowing third parties to use and benefit from the data. With these data-delivery options — and others in development — datatokens provide improved structural security for data providers, an element that’s often insufficient in other data marketplaces.

Ocean Market: Ocean Protocol’s Data Marketplace

Ocean Market, which is Ocean Protocol’s data marketplace, functions like a decentralized exchange (DEX) for data. Participants can use Ocean Market to earn OCEAN by listing and selling data, staking OCEAN tokens, or running their own fork of Ocean Market. Let’s explore each of these opportunities in order.

To begin listing and selling data on Ocean Market, a data provider simply needs to have a sought-after dataset — either a private collection of data or a public dataset with value-added potential. For example: value-added data could be a cleaned-up or optimized version of a public dataset, or it might feature additional labels and categorizations. It could also include a public dataset on which someone has performed additional functions. Whatever data a provider intends to sell on Ocean Market must first be tokenized as datatokens and listed for access. When new data assets are published, Ocean refers to the listing as an Initial Data Offering (IDO). New data assets are added to the market as ERC-20 tokens, and are equipped with all the interoperability of Ethereum’s most popular tokenization standard.

As new assets, datatokens need to undergo a process of price discovery. A data provider can either set a fixed price for a datatoken, or allow the price to be discovered by using Ocean’s automated market maker (AMM) mechanism — which is powered by Balancer. Sellers keep nearly all of the proceeds from sales, while a small portion (typically 0.3%) is divided equally among stakers, the marketplace itself, and the Ocean community.

This leads us to the next way of earning on Ocean Market: staking. Ocean Protocol’s stakers operate much like liquidity providers. Staking on Ocean Protocol involves OCEAN token holders staking for particular datasets — thereby becoming liquidity providers for a particular OCEAN-dataset pool — and earning a percentage of the exchange fees that the pool generates. The default fee is 0.1% of the pool’s exchange volume, although this is ultimately decided by the data provider, who might opt to increase the portion set aside for stakers.

In this way, stakers can choose which datasets they want to provide liquidity to — or “curate,” in Ocean’s parlance — and they stand to earn more OCEAN rewards from datasets with higher volume. With more popular datasets attracting more liquidity, this mechanism can also serve to distinguish high-quality datasets from inferior or less-reliable datasets.

Lastly, Ocean also provides tools and guidance for interested businesses to create their own personal data markets, either by forking Ocean Protocol directly or by taking advantage of Ocean code libraries that are freely supplied to catalyze other Ocean-powered data marketplaces. This allows for other specialized data marketplaces to arise and become tailored for certain use cases or data niches.

As mentioned above, the typical 0.3% exchange fee is split among stakers, the marketplace, and the community. The marketplace fee supports the sustainable growth of data marketplaces, providing a monetary incentive to keep them running smoothly and efficiently. In the case of Ocean Market, the marketplace fee is passed on to the Ocean community, meaning that the community receives two-thirds of the 0.3% fee. The Ocean community is involved in creating the forthcoming OceanDAO, and is building teams to improve the platform, facilitate community outreach, secure partnerships, and more.

Ocean Protocol Community Involvement and Development

Since its inception in 2017, Ocean Protocol has worked toward establishing full decentralization. In November 2020, the OceanDAO was released as a community-led grants proposal system. OceanDAO lets OCEAN token holders have a say in which Ocean community projects and developments receive grant funding.

Ocean Protocol strives to act as a bridge between the multi-billion-dollar data industry and the world of decentralized finance (DeFi). Using its unique data-tokenization model, data providers are able to efficiently monetize their data while retaining privacy and control, and data consumers can access previously unavailable data through a robust marketplace. Everyone in the Ocean Protocol ecosystem benefits from the enhanced security, accessibility, and provenance of blockchain technology. In this way, Ocean Protocol leverages blockchain technology to improve the realm of data services. Both industries have much to offer the other, in what is proving to be a fruitful, symbiotic relationship.

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