Coin Report #37: Ocean Protocol

Coin Report #37: Ocean Protocol

N.B: The following Coin Report on Ocean Protocol is community-selected.

Welcome to the 37th Coin Report. In today’s report, I will be assessing the fundamental and technical strengths and weaknesses of Ocean Protocol. This will be comprised of an analysis of a number of significant metrics, an evaluation of the project’s community and development and an overview of its price-history. The report will conclude with a grading out of 10. I hope you enjoy the read!

Introduction

Prior to researching this report, I had not even heard of Ocean Protocol. Well, I suppose that is somewhat of a lie: I was aware enough to include it in my community poll for this quarter, thanks to the barrage of tweets I received from the Ocean Protocol community, and, suffice to say, the engagement persisted; the project won the poll. Nonetheless, I was unaware of the nature of the project and remained so even after the results of the poll were announced. As such, today’s report will explore everything that I have learned about Ocean Protocol since I began my research process.

I hope the report will prove objective where it must be and fair on more subjective matters. For those who’d like to learn a little more about Ocean Protocol prior to reading this report, here are some primary links:


Fundamental

General:

Name: Ocean Protocol

Ticker: OCEAN

Algorithm: ERC-20 (Proof-of-Authority consensus on Mainnet)

Sector: Data Services

Exchanges: Bittrex, Hotbit, KuCoin, MXC & Bilaxy

Launch Overview

Ocean Protocol was conceptualised in January 2017 by BigchainDB and DEX Pte (a subsidiary of Newton Circus), with its development progressing for over a year, culminating in a pre-launch token sale in Q1 2018 and an Initial Exchange Offering in Q2 2019 after the successful launch of the network. Through four rounds of funding, Ocean Protocol raised $30.83mn.

The token itself was issued via the ERC-20 standard on the Ethereum network and had an initial supply of 690.9mn OCEAN with a maximum supply of 1.41bn OCEAN. The remaining 51% of tokens, equating to 719.1mn OCEAN, are reserved to be rewarded for the maintenance of the network over time.

Price-History Overview

Given that Ocean Protocol only launched its token in Q2 2019, there is only a few months-worth of price data available. During this time, only one clear market cycle can be observed, which we shall discuss in a later section. For now, it will suffice to say that OCEAN formed its all-time high upon initial listing at 566 satoshis, falling for two months subsequently and printing an all-time low of 120 satoshis. It currently trades in between these two extremes at 311 satoshis.

Project Overview

Ocean Protocol is clearly a deeply ambitious project, tackling a broad, complex and ever-evolving market: data. More specifically, it is seeking to facilitate the effortless interaction of data in a free market environment, ultimately allowing for more efficient AI modelling.

As stated in their Business Strategy paper:

Ocean Protocol is a decentralised data exchange protocol to make data and services universally available for applications in AI and beyond.

Ocean Protocol uses blockchain technology that allows data to be shared and consumed in a safe, secure and transparent manner. Ocean is a decentralised platform and network that connects providers and consumers of valuable data, whilst providing open access for developers to build services.

Ocean Protocol facilitates the network and infrastructure to bring together data providers, data consumers, and service providers into a marketplace commons. It does not impose vendor lock-in or extract monopoly rents. The control of the network is decentralized and distributed between the Foundation, the network keepers, the developers, the data providers and data consumers.”

Let’s begin with some Metric Analysis:


Metric Analysis:

Below are listed a number of important metrics, all of which are accurate as of 12th November 2019. For anyone reading this who has yet to read a Coin Report, it might be worth reading this section of the first report, where any potentially unfamiliar terms are explained. For any terms or metrics specific to this post, I will provide explanations besides the figures.

Metrics:

General:

Price: $0.0273 (311 satoshis)

Circulating Supply: 340,405,994 OCEAN

Total Supply: 613,099,141 OCEAN

Exchange Volume: $8.32mn ($49,453 excluding wash trading)

Network Value: $9.298mn (1058.66 BTC)

Maximum Supply: 1,410,000,000 OCEAN

% of Max. Supply Minted: 43.48%

Network Value at Max. Supply: $38.514mn

Exchange Volume-to-Network Value: 89.51% (0.53% excluding wash trading)

Category: Lowcap

Average Price (30-Day): $0.03

Average Exchange Volume (30-Day): $8.527mn (likely only 1% of this is real)

Average Network Value (30-Day): $9.981mn

Average Exchange Volume (30-Day)-to-Network Value: 85.43% (estimated 1% excluding wash trading)

Volatility* (30-Day): -0.0884

Average Daily On-Chain Transactions (30-Day): 75.5

Average Daily Transactional Value** (30-Day): $147,565 (source)

NVT*** (30-Day): 63.01

% Price Change USD (30-Day): +7.8%

% Price Change USD (1-Year): N/A

USD All-Time High: $0.047

% From USD All-Time High: -23.1%

Premine % of Max. Supply: 0%

Premine Location: N/A

Liquidity (calculated as the sum of BTC in the buy-side with 10% of current price across all exchanges): 1.676 BTC

Liquidity-to-Network Value %: 0.14%

Supply Available on Exchanges: 9,690,365 OCEAN

% of Circulating Supply Available on Exchanges: 2.85%

*Volatility is calculated by taking the average price over the given time-period, calculating the difference between it and the highest price and it and the lowest price over that same time-period, and multiplying those figures together. The closer to 0, the less volatility during that period, and vice-versa. Read this for more on volatility.

**Transactional Value in $ is calculated by taking the daily transactional value in OCEAN and multiplying it by price.

***NVT is calculated by dividing the Network Value by the Average Daily Transactional Value. See here for more on NVT.

 

ICO:

The following details were taken from this source.

Public ICO Period: 30th April – 3rd May 2019

Total Tokens: 1,410,000,000 OCEAN

Total Raised: $6,000,000

Average ICO Price Per Token: $0.12

Total Tokens Sold50,000,000 OCEAN

Further Details: There were 4 separate funding rounds: the Seed round in 2017 raised $4.37mn; the Pre-Launch round in January 2018 raised $18.61mn; the Network Launch round in March 2019 raised $1.85mn; and the Initial Exchange Offering in April-May 2019 raised a final $6mn. Total raised was $30.83mn. 

Regarding token distribution, 51% of the maximum supply is reserved for block rewards; 5% is allocated to the Ocean Foundation; 20% to BigchainDB and Newton Circus; and 24% to Investors.

 

Supply Emission & Inflation:

Block Reward Schedule: 50 years until the maximum supply is reached; emissions ramp up after the first 3 years and then plateau towards the end of the 50-year period.

Average Block Time: N/A

Current Block Height: N/A

Annual Supply Emission: 4,444,072 OCEAN (13.82 BTC at current prices – only accounting for the emission of network rewards, as per the model depicted here)

Annual Inflation Rate1.31%

Circulating Supply in 365 Days: 344,850,066

 

Distribution:

Address Count: 5,197

Supply Held By Top 10 Addresses: 53.31%

Supply Held By Top 20 Addresses: 64.1%

Supply Held By Top 100 Addresses: 83.68%

Inactive Address Count in Top 20 (30 Days of No Activity): 10

 

Analysis:

Given the lack of staking or masternodes for Ocean Protocol, there are fewer metrics to work through here than for many reports. Nonetheless, there is plenty to get stuck into.

To begin, let’s take a look at the transaction-related metrics, as these give us an indication of non-speculative usage of the token. The caveat here is that the data accounts only for ERC-20 transactions:

Using the past 30 days of data, I found that there were 75.5 Daily On-Chain Transactions on average, equating to $147,565 of Daily Transactional Value. This would give OCEAN a 30-day NVT of 63.01; roughly equal to that of Bitcoin at present, indicating potential undervaluation of Ocean Protocol.

Moving on, I’d like to take a look at Volatility, which I calculated to be -0.0884 for the past 30 days; this places Ocean Protocol somewhere in the middle amongst prior reports for 30-day volatility, giving little indication as to whether an accumulation range has formed or not, at least against the Dollar; remember, periods of consolidation lead to expansion, and at present we have no sign of consolidation.

Next up, we have the metrics relating to Liquidity:

Firstly, I found that there was ~1.68 BTC of buy-side liquidity within 10% of current prices to be found across all exchanges, equating to 0.16% of its Network Value. This places Ocean Protocol in the bottom-third for liquidity of prior reports. This is not particularly impressive and does not give me much confidence in current buy-side demand for the token.

As for sell-side liquidity, I found that ~9.69mn OCEAN was available for purchase in the orderbooks, equating to 2.85% of the circulating supply. This is the 10th-highest figure ever recorded in these reports, suggesting that, whilst there is no overt demand to buy at current prices, holders are also keeping a relatively high proportion of balances in the orderbooks on exchanges.

Moving onto volume, Ocean Protocol is reported to have traded $8.32mn of Exchange Volume over the past 24 hours, equating to 89.51% of its Network Value; of course, this would be inconceivably impressive if it were true. When we take a deeper look at the exchanges trading the token, we can clearly see that at least 90% of this is on exchanges that wash-trade. As such, the real figure for Exchange Volume is likely closer to $49,453, equating to a far more modest 0.53% of Network Value. The same is true of its Average Exchange Volume for the past 30 days of $8.57mn, equating to 85.43% of its Average Network Value for the same period. When we discount wash-trading, this figure is likely closer to ~$85k, equating to 0.85% of its Average Network Value. This is within the lower-third of projects previously reported on, again suggesting that there is not a great deal of speculative interest in OCEAN at present.

Now, let’s take a look at the (somewhat complicated) Supply Emission:

Given that OCEAN was distributed via token sale, there is a supply of ~690mn OCEAN that is already in existence, but ~710mn OCEAN has been reserved for future network rewards. Moreover, the reward schedule begins with subdued emission for the first few years, followed by a swift ramp-up of rewards culminating in a plateau, with the full emission in existence after 50 years. As such, I was able to determine that (accounting for network rewards alone, not the release of vested tokens from the initial 690mn) 4.4mn OCEAN will come into circulation over the next 365 days, equating to 13.82 BTC at current prices. This gives Ocean Protocol supremely low annual inflation of 1.31% on its current circulating supply of 340mn.

What is more important than emission alone, however, is the relationship between it and traded volume:

Using the above figures, we can calculate that Average Daily Supply Emission will be 12,175 OCEAN, equating to 0.0378 BTC, or $333-worth. This is negligible when the wash-discounted traded volume of $49,453 is taken into consideration, covering daily emissions by a whopping 148x. Moreover, when the average traded volume of roughly $85k is considered, daily emissions are covered over 255x. Further, Ocean Protocol’s liquidity of 1.68 BTC covers these daily emissions by 44.4x.

This, in short, means that there are effectively zero headwinds for price growth, and so any periods of decline in price are unlikely to be the result of inflation. Instead, they must be either driven by manipulation by larger holders or panic-selling by weak hands.

Regarding the above statement, we can find clearer evidence by looking at Distribution:

I found that there are 5,197 holders of OCEAN on the ERC-20 standard. Further, I found that the top 10% control 53.31% of the supply; the top 20 control 64.1%; and the top 100 control 83.68%.

Of the top 20, 10 addresses were inactive for the past 30 days and the 2nd and 8th-richest addresses belonged to Bittrex and KuCoin, respectively. Ignoring these, we have 8 active, privately-owned addresses in the top 20 and it is their activity that we must concern ourselves with:

Of these 8, the 3rd-richest distributed 95k OCEAN over the past 30 days; the 9th-richest distributed 5mn OCEAN; the 12th-richest distributed 9mn; the 14th-richest added 2.85mn; the 15th-richest added 6mn; the 16th-richest added 2mn; the 17th-richest added 5.7mn; and the 18th-richest address added 303k OCEAN over the past 30 days.

Overall, we have 5 of the top 20 addresses in active accumulation and 3 in distribution, with net inflows into the top 20 of 2.76mn OCEAN over the past 30 days.

And that concludes this section; onto the Ocean Protocol Community:


Community:

There are two primary aspects of community analysis: social media presence and Bitcointalk threads. I’ll begin with the former before moving on to the latter.

Social Media:

Concerning social media presence, there are four main platforms to examine: Twitter, Facebook, Telegram and Discord.

Ocean Protocol is present on all four platforms. To begin, let’s look at the various social metrics that I calculated from the Ocean Protocol Twitter and Facebook accounts:

Twitter Followers: 15,160

Tweets: 2,176

Average Twitter Engagement: 0.31%

Facebook Likes: 390

Facebook Posts (30-Day): 0

Average Facebook Engagement: N/A

As usual, I will be using RivalIQ‘s social benchmark report for evaluation purposes.

Twitter:

Ocean Protocol has a relatively large audience on Twitter of 15,160 followers, which places it 9th amongst prior reports. Less impressively, it has modest engagement. The average engagement rate is 0.31%, which is the 10th-lowest, relative to projects in prior reports. Relative to global benchmarks, this is 34.4x greater than the Media industry and 6.5x greater than the average across all industries.

Facebook:

Despite finding that an Ocean Protocol Facebook page exists, I was disappointed to see that zero posts have been made over the past 30 days and that the page is effectively dead, despite having an audience of 390. In truth, there is no excuse for this, as even a simple, automated repost of important tweets would help to maintain the page and perhaps even grow the community on this particular platform.

Discord:

The Ocean Protocol Discord group is largely unused, though there are 97 members.

There are only two channels: General and Data Economy Challenge; neither has any real discussion occurring, with most messages consisting of bot notifications for new group members.

Telegram:

The Ocean Protocol Telegram group has 8,050 members and is clearly the primary platform for the community.

Having looked over the group, I observed that a handful of messages are posted on a daily basis, with some degree of active engagement evident. However, given the size of the group, I would have expected to find near-constant discussion between a greater proportion of the group. Below, I have condensed my findings from the discussion that has taken place over the past week:

  • Ocean Protocol utilises IPFS in the Ocean stack to facilitate decentralised file sharing.
  • The conversation in the group is quite general, rather than specific to Ocean Protocol’s present and future development; given the complex and broad nature of the project, I’d have expected more palpable interest.
  • The team’s founders are currently giving international keynotes to spread awareness.
  • New blog posts are pushed out regularly, providing the community with key development updates.
  • DIDs (Decentralized IDs) will help to facilitate object identification in Ocean and the goal is to standardise this throughout the protocol.

Overall, I wasn’t particularly impressed with the lack of quality information native to Telegram; in order for new users to discover more about Ocean Protocol, they would be forced to look elsewhere. Usually, the main social platform for a project also functions as the hub for constructive conversation and I tend to find out more about both, the nature of the project and the community. This is particularly strange in Ocean Protocol’s case given that the community are clearly highly-engaged in some respects, as they managed to secure this report by winning the community poll; despite this, I saw little evidence of similar engagement centering on the progress of the project itself.

The pinned message is fairly comprehensive for new members, providing a number of relevant links to other platforms, resources and documentation. Overall, somewhat promising, particularly regarding the development of the project itself, but in need of greater engagement from the wider community. These are the spaces in which critical discussion must be taking place, shaping the direction of the future of the protocol, particularly if its aim is to be largely decentralised.

I should add that there is also a Telegram channel for Ocean Protocol news with 4,000+ members but that this remains dormant since mid-October.

BitcoinTalk:

Ocean Protocol does not have a BitcoinTalk thread.

And that concludes this section. Let’s now take a look at some Development.


Development:

For the following Development analysis, I will be evaluating project leadership, the website, the roadmap, the whitepaper, the wallets and finally providing a general overview:

Project Leadership:

34 team members are listed directly on the website with 16 advisors; however, there are 62 employees on LinkedIn and 56 are listed here with 12 advisors.

Clearly, this is an enormous team with a great breadth and depth of experience (as one would expect from some 60 employees). Most significantly, all relevant fields of expertise (development, legal, sales, operations, marketing, finance etc.) appear to be covered.

Overall, highly impressive.

Website:

https://oceanprotocol.com/

The Ocean Protocol website is modern, well-designed and particularly well-branded, with clear and comprehensive navigation menus and prominent social links. One point I’d like to make here is that for greater accessibility it may be helpful to add a Token tab, perhaps to the More menu, containing a page detailing the token specification and other useful information about OCEAN itself, as this does not appear to be native to the website.

The homepage displays the tagline “A Decentralized Data Exchange Protocol to Unlock Data for AI“; apt, but wordy. Data, Unlocked might be equally explanatory and more succinct. Alongside this, we find an introductory video and links to learn more about the protocol and the roadmap. Below, we find all relevant social channels.

Scrolling further, we find links to pages for the Protocol, the Community and the Developers, aligning with the primary navigation menu in the site header. Further still, we find a link to the Data Economy Challenge, inviting developers to build with Ocean Protocol with 3.4mn OCEAN up for grabs. Next, we find upcoming events, in places like Berlin, Kuwait and Vienna just this month. As we approach the bottom of the homepage, we find a selection of articles from the OCEAN blog, which links back to their Medium; it is great to see regular, detailed blog posts being published here. Finally, we find links to documentation and technical resources, plus branding kits and an FAQ. The trio of links to the ProtocolCommunity and Developers pages are once again found here, though I expect this is by design.

Now, more specifically, on the Protocol page we can find a brief summary of the aims of Ocean Protocol:

An ecosystem for the data economy and associated services, with a tokenized service layer that securely exposes data, storage, compute and algorithms for consumption.”

In effect, OCEAN will facilitate revenue generation for data providers and data discovery for consumers.

The key components of the protocol include secure and transparent data sharing, a tokenized service layer and a seamless marketplace ecosystem.

Further down the page, we find the roadmap and links to documentation, both of which I shall cover in subsequent sections.  Below this, we find information on the team itself, plus an overview of current collaborators, including (impressively, might I add) MOBI, Unilever, Roche, Couger, Enigma, Messari and Digital Commerce Intelligence. More details can be found on each by hovering over their icons.

Further still, we find the crux of the problem: only 1% of data produced in 2016 was analyzed, leaving vast upside for technology that can facilitate the interoperability of this data.

Overall, the website is incredibly informative and superbly designed. Very impressive.

Roadmap:

https://oceanprotocol.com/protocol/#roadmap

The roadmap is visually appealing and presented chronologically, beginning with the Seed round in November 2017. Importantly, each goal links to further reading.

For the purposes of this section, I will refrain from covering the historical, focusing on the present and future plans of Ocean Protocol.

Beginning with April 2019, the Nile beta network was deployed successfully, a commons marketplace was released and Project Manta Ray (data science workflow) was also released. Presently, we have the release of the Pacific Mainnet operating with Proof-of-Authority consensus; this went live in July. Further, a token bridge was created for exchange between Mainnet and the ERC-20 standard, an update was released for the commons marketplace and IPFS was integrated for decentralized file hosting.

Moving onto future goals, the March 2020 section is dubbed Compute to the Data and will see a Beta version released for this on cloud providers; new asset support in Ocean; registration of Compute services; and a CLI release facilitating the publishing and execution of algorithms in private data.

V3 of the protocol is expect at a later date than this, though this is not specified, and will include verification and validation of conditions and services, as well as network rewards and incentives.

V4 will bring with it on-chain bounties and clan governance, specific to groups or individual marketplaces.

Finally, V5 will culminate in a fully permissionless Ocean Protocol with balanced governance.

Overall, there is a lot to digest here and much to look forward to; most importantly, the team is clearly delivering on expectations.

Whitepaper:

The Technical Whitepaper can be found here. The Business Strategy paper can be found here.

For our purposes, we will be dealing with the latter.

The Business Strategy paper begins with an introductory page, detailing the nature of the project and its aims, which we have covered in prior sections. In short, Ocean Protocol seeks to make data exchange seamless, with the OCEAN token acting as the medium of value exchange within the network. Development of the protocol is supported by Ocean Foundation; a non-profit based in Singapore.

Following this, we are given an overview of the need for the protocol, with the primary problem being that less than 1% of produced data is ever analyzed, leaving huge amounts of data untouched. With AI operating more efficiently with more available data streams, the need to unlock this data is imperative for technological progress.

And why has this data remained untouched? The document states that it is “because sharing has been too risky.” Privacy, security and transparency are critical if data is to be exchanged effectively and this is not possible with centralized exchanges.

Data providers, we are told, want control of the usage of their data, transparency of the data flow, compliance with international regulations and confidence that they will be paid fairly for their data. Ocean Protocol will provide this.

Following this, there is a page on The Ecosystem, which is comprised of data providers, data consumers, the community, marketplaces and developers. The marketplace will allow for data providers to be paid for their data, store it on premise, publish data, curate free public data, set pricing, have control over usage and have visibility on access. For data consumers, it will allow for the discovery of data globally, the purchase of data from the marketplace, free public data, transparent pricing, clear usage guidelines, data sampling for quality, reviews and reputation, AI models and data tracking.

OCEAN will be the token that acts as “the native currency of the protocol and network.” Ocean tokens will be earned by data providers, data curators, network maintenance and the facilitation of marketplace relationships.

Subsequently, we are provided with a number of use-cases, including independent living at home utilising sensors and insurance, particularly in ageing populations. Smart living, facilitated by data exchange, will achieve this. This is one of three current real-world use-cases provided.

Most significantly, we are introduced to Ocean Protocol’s collaborators and stakeholders, with the Republic of Singapore signing a memorandum of intent with Newton Circus to “foster the formation of data collaboratives.” The agreement includes the usage of the Ocean Protocol and its native token as the means of value exchange. Singapore, the document states, is “the lead government partner for Ocean Protocol.”

Beyond this, we are told of companies involved in data sharing with Ocean Protocol, including Unilever, Aviva, Roche, Johnson-Johnson and Microsoft, though details of each relationship are not provided. Over the following pages, other collaborators are mentioned in a varied capacity, including MOBI, Enigma, Messari, SingularityNET, AI Singapore, KPMG and Web3.

From the seed and pre-launch phases of development, over 3,500 project contributors joined the protocol from over 100 countries.

Following this, we are introduced to BigchainDB and Newton Circus, whose collaborative efforts led to the development of Ocean Protocol, with a timeline for the progress of this development provided.

Moving on through the document, we find a number of links to technical documentation, the roadmap, developer resources and tutorials. A few pages are also dedicated to the founding team and advisors, which we have covered above, as well as an ambassador network of 236 individuals from 46 countries. The document concludes with a nod to other projects developing data services, including Enigma, Datum, Streamr and Morpheo.

Overall: highly informative, relatively concise and largely jargon-free.

Wallets:

OCEAN can be stored on any wallet that stores ERC-20 tokens.

And that concludes this section on Development. Onto the technicals:


Technical

OCEAN/BTC

OCEANBTCDaily

As can be observed from the OCEAN/BTC Daily chart printed above, price printed its all-time high upon initial listing on an exchange in May 2019 at 566 satoshis. Following this, there is a clear drop-off that set a bottom at 320 satoshis; a bottom subsequently broken in late June, culminating in several weeks of consolidation above 200 satoshis before a breakdown to the all-time low at 120 satoshis in August.

From this point, OCEAN’s first bull cycle began and several weeks of uptrend ended with a cyclical high of 493 satoshis in October. Price fell off from here, though printing a higher-low at 223 satoshis at the end of October. We have since seen a sharp reversal, with price closing back above the 100-day moving average after a brief spell below it; a local high has been set at 430 satoshis and price has once again fallen off back to the 100MA.

I am currently watching for a new level of support to form and perhaps a new accumulation range above 250 satoshis. If price can print a higher-low on the Daily, I will look at buying, expecting a higher-high to follow above 430 satoshis and, eventually, a break above the current all-time high. Volume continues to rise, although, as we discovered in the Metric Analysis section, much of this is wash. Regarding a stop-loss after any potential entry, 200 satoshis seems like a fair area as a break below here would open up a move back to the all-time low.


Conclusion

This report is now approaching 5,000 words and it is time to draw it to a close.

My final grading for Ocean Protocol is 8 out of 10.

Here, you can find my grading framework, for reference.

Lastly, here is a link to a Google Sheets file with any significant data from previous reports compiled for cross-comparative purposes. I will keep this updated as I continue to write these reports.

I hope this report has proved insightful and that you’ve enjoyed the read! Please do feel free to leave any questions in the Comments, and I’ll answer them as best I can.


 

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This Post Has One Comment

  1. Could you report about kcash?
    I think it is familiar to Seele which grows 50X this year

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