Ocean Protocol is another project making waves in the blockchain space by facilitating secure sharing and monetization of data. At the center of this ecosystem is the Ocean token, the currency that powers the network and provides incentives for participant engagement. To participate meaningfully on the OCEAN platform, you will want to know more about its tokenomics. This understanding is critical for data providers, consumers, and investors to the data. This article will explore the most important aspects of Ocean’s tokenomics. We’ll break down its supply, distribution, and the decentralised mathematics that rewards active users.
Understanding Ocean Token Supply and Distribution
The total supply of Ocean tokens is limited to 1 billion. This lack of increase in supply is one of the key elements of its economic model, intended to create scarcity as time goes on. When the network opened up, there were 235 million pre-mined tokens. This early supply was purposefully distributed among different parties to jumpstart the ecosystem and have it function effectively.
The distribution of Ocean tokens is carefully planned to support the long-term growth and sustainability of the network. For our part, we pay an equal or larger share—25% to 50% to our contributors. They are essential partners in further developing and launching the Ocean Protocol. These contributors are people such as developers, researchers, and civic tech community members who play a vital role in helping the project thrive.
To address the need for long-term commitment from critical stakeholders, Ocean Protocol uses a vesting schedule for token distribution. Those who contributed to the seed round, listed as one of the first backers of the project, have their tokens locked for 2.5 years. There is a 1.5-year lock-up period before the launch of the network. After that, there is a 1-year linear vesting schedule. Founders have a vesting period of 5 years from the project's start, while Seed and Pre-Launch contributors have 1 year and 6 months of linear vesting respectively from the network launch in Q1/2019. These progressive vesting schedules help ensure stakeholders’ interests are aligned with the long-term success of the Ocean Protocol. Notably, they are specifically designed to create that synergy.
Staking OCEAN: Earning Rewards and Curating Data
Ocean Protocol encourages users to continually engage with the network by rewarding them for staking. Users can stake OCEAN on datasets by depositing into liquidity pools with datatokens. This last piece is all about creating the market. Liquidity is key to any marketplace. When you stake OCEAN, you receive rewards. In addition, you simultaneously help curate the data and increase demand for the token.
She goes on to explain that fees earned in an Ocean-powered data marketplace are intentionally shared across the ecosystem. In return for continuously supplying liquidity, stakers earn a portion of these fees. The marketplace itself takes a cut, further motivating it to operate a clean, safe, and efficient marketplace. A portion of the profits goes back to the Ocean community. This funding allows us to continue to lead the way in developing and growing the ecosystem around this technology.
The exact staking rewards are pegged to Ocean Market transaction fees. The average swap fees earned per transaction is variable but often in the range of 0.01% – 0.3%. This exact percentage will vary based on the liquidity of the liquidity pool and specific market conditions. Read Ocean Protocol’s blog post for more info on the detailed staking opportunities available in Ocean Market. It points out the related dangers you need to watch out for. Staking not only provides financial incentives but encourages users to actively curate data, contributing to the overall quality and value of the Ocean ecosystem.
Governance Participation Through OceanDAO
Ocean Protocol decentralizes power to its own OCEAN token holders by allowing them to govern the protocol through an OceanDAO. OceanDAO is a community powered grants proposal system. It gives OCEAN holders the power to vote on which Ocean community initiatives and infrastructure projects get funded. This decentralized governance model is what allows the community a direct, vested interest and ongoing influence on the ever-changing direction of the protocol.
Through OceanDAO, token holders can play a direct role in determining the future of the Ocean ecosystem. Even the details on the voting process are murky. By default, it’s a pretty fair assumption that holders of these tokens have the ability to vote on proposals in OceanDAO. This voting mechanism allows them to influence which projects receive funding, thereby guiding the development and evolution of the protocol.
With governance participation unlocked via OCEAN, demand for the token grows. Holders know just how powerful and valuable it is to have a seat at the decision-making table. In this way, through a more active role in governance, token holders will play a direct role in the health and sustainability of the Ocean ecosystem. This deliberate decentralized governance model fosters a widespread sense of ownership. It encourages each community member to become an active participant in the stewardship and evolution of the protocol.
veOCEAN Rewards and Enhanced Incentives
Ocean Protocol’s veOCEAN rewards encourage long-term commitment and maintain active participation of the community. The long user lockup mechanism encourages users to lock their Ocean tokens for longer periods of time to earn more veOCEAN. This new veOCEAN lets you to fünd passive rewards. This unique mechanism encourages users to stake their tokens over a longer horizon. It puts their interests in lockstep with the protocol’s long-term success.
The allocation of veOCEAN is straight linear to the lock time. For example, locking 1 OCEAN for 1 year would provide 0.25 veOCEAN, and locking that same 1 OCEAN for 4 years would yield an equivalent of 1.0 veOCEAN. This tiered system provides greater rewards to users who better prove their dedication to the network. veOCEAN stakers currently receive a revenue share of 15% from psdnOCEAN and Data Farming. This formula provides them with a steady, inflation-proof source of passive income.
Ocean Protocol adds a deflationary mechanism to accelerate the increase of value of the Ocean token. Together, we burn a full 5% of all network revenue. This means there will be fewer tokens overall, and that can increase the value of the tokens that are left. This burn mechanism serves to create scarcity and rewards holders who want long-term benefits. The network includes 10-year half-life rewards, emitted programmatically to encourage a long-term holding culture. This disbursement schedule, like Bitcoin’s, provides an incentive for users to stay in the network for a long time. 51% of the OCEAN token supply is allocated to network rewards to incentivize network participants. As a result of this very generous allocation, active users are well-rewarded for their contributions, helping to create a vibrant, engaging community.
