Ocean Tokenomics
About the token price, lock-up period and vesting.
Editor’s Note: This blog is not meant to be investment advice nor a solicitation for acquisition of Ocean tokens. The full list of Disclaimers at the bottom of this blog post.
We’re doing our token launch a little differently from the others. Instead of giving whales the best deals, using bonuses to reel in speculators and fabricating waves of hype, we are running a transparent, inclusive and fair token distribution.
By raising 9M€ from the public for only 3.2% of the tokens, subjectively, our implied network valuation and token price is higher than other projects. We also have long lock-up and vesting periods.
We’re restricted from publicly responding to certain questions on token valuation because discussions of token value in public could place the Foundation at risk. We abide by all laws and we respect them for their intent, however it’s clear that not talking publicly about token valuation hurts the discourse and our effort to build a global community of informed contributors.
tl:dr version
Total Raise — we are raising 22M€ ($27M) for the Seed & Pre-Launch. 13M€ of the 22M€ has already been raised and 9M€ is available on March 7 via a public Pre-Launch token distribution for the 10,000 whitelisted participants.
Token Valuation — 235 million tokens are available on network launch. If Ocean were live today, it would barely break the top 200 cryptocurrencies with a market cap at 47M€ / $58M, a far cry from the valuation numbers reported by others. We’ve also benchmarked our project to other similar projects in terms of team, experience, technology and opportunity.
Token Price — unlike projects that rely purely on investor sentiment and a series of announcements to pump their token, we did a fundamental analysis of what a data economy and utility token should be priced at — already in late-2017, within two weeks of Chris Burniske’s article on token valuation coming out. If the analysis is correct, the token is priced fairly.
Lock-Up — tokens are locked because they are a utility token. Utility tokens can’t be traded before network launch, else they are a security. If they are a security, then they must be treated as such and restricted from non-accredited US / Canadian contributors. We need everyone being able to hold Ocean tokens — students, data scientists, enterprises, governments, etc. without restriction — thus we MUST lock the tokens until network launch. If you have a twitchy trigger finger and want to exchange for tokens when you can use it immediately, come back in Q1/2019.
Vesting — at each phase of the token distribution, the contributors are locked up. Earlier contributors stand to benefit more but the price they pay is the lock-up. This is fair to people who come in later. Founders have 5 years from project start, while Seed and Pre-Launch have 1 year and 6 months linear vesting respectively from network launch in Q1/2019. If these vesting periods are too long, then it’s not the right time for you to join the project.
Hard Cap —we have hard caps by each phase — Seed, Pre-Launch and Network Launch. It’s not possible to calculate a total hard cap for the project.
Detailed answers are further below.
Why are We Doing Ocean Protocol
After reading an early release of The Second Machine Age, we realized that we have a lot of work to do quickly because technology is racing ahead faster than societal structures and government can react. We need to put in place the infrastructure that levels the playing field for every human, to be able to own their data. And we need to do this fast. There isn’t a moment to lose because existing centralized internet platforms and our governments are failing all of us.
Ocean Protocol takes us in the right direction because it places a value on data that wasn’t possible before. Once people see that their data has value, they will want to control it. An analogy is the crypto-community itself. Crypto-investors see the possibility to make global investments into the best teams without restrictions and are thus arming themselves with the tools to analyze and vet opportunities. By aligning incentives and giving people all across the world the ability to partake in a new economy, they are looking for the tools they need to take control.
We see the same for data. By giving people control over their data, people will finally be able to have the awareness and agency to control their data and decide how it will be used.
Since 2013, we have been driving forward with these ideas — even when VCs would laugh us out of the room. But we kept persevering and in 2017 everything changed. The miracle of token offerings gave us, and many other quality teams, the ability to fund ideas with a speed and diversity never before possible. It also allows teams to build communities that span the globe.
Our goal is to build these technologies as quickly as possible because it opens up more possibilities for people.
Goals of the Token Distribution
For more context, it helps to list the design goals of our token distribution from the Business Whitepaper:
• Fairness to all stakeholders is our guiding principle
• Aim for the broadest distribution possible, either via the token distribution event or bounties.
• Incentivize network users and participants, such as data providers and AI researchers
• Reward long-term acquirors and believers in the utility value of the network
• Ensure that the Foundation receives the required funds to build the network, activate the ecosystem and meet any potential liabilities
• Ensure that data providers and large enterprises are comfortable with the token distribution, so that they will be comfortable sharing data and transacting on the network
• Benchmark Ocean Protocol network and Ocean Token valuations to other projects of similar maturity and quality
• Respect and comply with applicable securities, banking, privacy and data protection laws.
It’s a fine balance to meet all these goals without compromise but we’ve used this checklist to try to hit every point.
This project aims to spread opportunity and awareness. To give you an idea, for the Seed and private Pre-Launch round, 2/3rds of contributors had never contributed to a crypto-project before. People from 160 countries signed up to contribute in the public Pre-Launch. Looking at the breakdown, most contributors are completely cut-off from the traditional nexus points of power and wealth in San Francisco, New York, London and Tokyo. We are bringing brand new converts into the crypto-ecosystem.
We chose explicitly to give the public a shot at getting in earlier than most other projects where whales get in early and the public gets the shaft. Just look at how many other tokens proceed to drop in price like a rock as soon as they are available for use, many with no inherent utility value. Many quality teams are choosing to keep their early token distributions private because whales offer them funding so they don’t need to deal with the public until network launch.
We’re being transparent because we want to activate a vibrant and informed community that will join us in this journey to liberate data. Your participation is an essential part of giving utility value to the token. Whether it’s signalling your support in public, contributing to our codebase, lining up potential partners or putting your time towards advocacy efforts, we need a lot of quality ideas. The more people that have Ocean token, the more utility is imbued into the token itself because of network effects.
On Price, Vesting and Lock-Up
We’ve put a great deal of thought in a token distribution that prioritizes above all else, fairness.
Fairness is towards early contributors, the data/AI community, industry partners, government and to the team itself. We need to balance the desires of multiple stakeholder groups in a way that allows everyone to feel good and positive of the outcome.
- Founders have a 5 year vesting on tokens. Very few other teams have made this type of commitment. The only ones crazy enough to do this are the ones who believe in their technology.
- Seed contributors are locked in for 2.5 years, which includes the 1.5 years leading up to the network launch and a 1 year linear vesting period.
- Pre-Launch contributors are locked in for 1.5 years, which includes the 1 year leading up to the network launch and a 6 month linear vesting period.
We designed the token distribution to give early contributors a fair deal and the chance to reserve Ocean utility tokens before the network launch. We have a strong conviction that those who join us on the journey now, will be made whole if the team delivers.
Many have said that they expect the prices of crypto-tokens and currencies to increase by multiples of 2–8x in 2018. We hear that sentiment but there’s a need for a reality check. The price increases in 2017 were so unbelievably large that people forget that 99% of the world looks for opportunities that can return 2–8%. We can’t predict the future but if you want to deploy resources to other projects, we understand.
Think about the initial contributors to Ethereum. Most of them weren’t thinking 10x, lambos and moon when they took the leap and put their resources into the project. They saw a vision for the future, a young, eloquent leader and the chance to play a small role in disrupting the inequality that permeates our world. That early contributors made out like bandits, well, they are as surprised as anyone else. This is the type of community and values that we nurture. Go for the impact, long-term game and all else should work out.
We’ve designed the token distribution so that everyone has a fair shot at joining, when they want and how they want, while tying ourselves to clear milestones for collecting contributions.
If you decide you want to wait until network launch to participate, here’s what you get:
- No lock-up
- No vesting period
- A working product and network
- More collaborations
- More information
- Less risk
- A different price
When considering to join us now, or later. All we can do is lay out the picture as best we can and let you make the decision based on your own priorities.
Token Float and Market Capitalization
If people want to extrapolate to calculate the market capitalization for Ocean token on network launch, this is the estimated schedule of tokens that will be available in March 2019.
Multiply the Cumulative Tokens Emitted by the Pre-Launch price, you get a network value on launch of 47M€ / $58M and putting Ocean token at around #200 in the list of crypto-networks, if it were active today.
Important to note is 45% of all tokens are reserved for the block reward (emitted over 150 years with a half-life of 10 years), which incentivizes data sharing and miners to validate transactions. When people want to calculate the market cap valuation, they don’t take this into consideration, and as a result come to wildly inflated numbers.
It’s like taking the current price of Bitcoin and multiplying it by 21 million to get the value of the Bitcoin ecosystem. In Bitcoin’s case, this inflates the network value by 24%. For Ocean token, it would inflate the network value by 82%.
Token Metrics and Value
People look for cognitive guideposts when assessing tokens. All things being equal, a token project with the following characteristics is highly sought after:
- Tokens: 1 Billion, capped
- Available for Contributors: 25–50%
- Raise Amount: $20–50 Million
- Bonuses: 10–30%
- Lock-Ups: None, token is tradeable immediately
- Diluted Network Valuation: $70–250 Million
- Team & Advisors: A couple of blockchain developers and some advisor names that you recognize.
- Idea: Understandable to most people
- Technology: Not important
ICO rating services essentially go through the checkboxes and then issue a rating.
There’s also a nascent group of Vloggers taking the tools of experts (Chris Burniske, Alex Evans, John Pfeffer, Kyle Samani, and others.) and trying to apply them towards valuing tokens.
We caution everyone to take these educational resources with a grain of salt. For instance, one video points out that because the tokenomics of Ocean Protocol fall out of the range of expectation, a high network valuation, it’s a bad project to contribute to.
Using a sole metric, the fully diluted network valuation, to judge the project is misguided. If you wanted to buy a car and it cost $60,000, wouldn’t you ask questions like — Why is it more expensive? What are the features? What makes it special? You would base your analysis on a set of factual criteria and then align it to your values and priorities.
When it comes to tokens, we suggest the same. The problem for most people is the dearth of tools to assess opportunity, technology, team, partnerships and community. Most people are flying blind and relying on word-of-mouth but the hunger for knowledge is huge. But we can suggest one thing — judging us solely on token price is probably not the right mental heuristic.
We benchmarked ourselves to similar projects. There are a handful of teams on earth with the deep experience and technology know-how to pull this off. We think we’re one of the teams. We have been in blockchain 4+ years — much longer than most, we’ve built many of the core conceptual pieces of the protocol based on actual live engagements, we have a series of relevant partnerships and no other team has the breadth of skills ranging from blockchain, big data, AI to data exchanges. Our technology is leading edge and it will unlock data in ways not possible today. We’ll be coming out publicly with a list of Tier 1 partnerships and advisors in the near future. So we’re going to be fair to everyone, including ourselves. This means putting a fair price to the token and network that we’re building.
We benchmarked our token and the value of a data economy. We’ve done internal modelling on what a token economy and data economy token could be worth based on Chris Burniske’s token valuation model. Tokenomics is a new world but we assure you, we thought about every aspect from multiple perspectives. The entire team looks forward to have an open discussion.
We’re about fairness, community and accountability. These values permeate everything we do — the tokenomics, our partnerships, and the technology we build. We are levelling the playing field, being inclusive and working to give people control over their data.
Choose this project because it has a vision. Choose this project because it is different from the others. Choose this project because we’re raising enough to build the technology and activate the ecosystem, not an indiscriminate amount. The token price is fair, but not cheap. We know how we’re deploying the funds — to community, collaborations and technology. Most importantly, we want you to join us, to help build the protocol and network that gives you, and every other human on earth, control over what is rightfully theirs.
Join the conversation and post your feedback on our Telegram channel. We welcome you.
DISCLAIMER
Unless otherwise agreed to in writing, communications from Ocean Protocol Foundation are intended solely for informational purposes, and should not be construed as investment advice and are not meant to be a solicitation or recommendation to buy, sell, or hold any tokens mentioned. Ocean Protocol Foundation is not registered as a securities broker-dealer or an investment adviser with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority (“FINRA”) or any state securities regulatory authority.
We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided “AS IS” without any warranty of any kind. Ocean Protocol Foundation is not responsible for typographic errors or other inaccuracies in the content. The information provided in this communication should not be used as the sole basis for making any acquisition decision. Rather, readers should use the information as a starting point for doing additional research on the token mentioned in order to allow the reader to form their own opinion. We do not guarantee, warrant or represent that any acquiror purchasing or selling such tokens will profit from doing so. The possibility exists that acquirors may lose all or a substantial portion of their investment were they to buy or sell such tokens. Non-factual statements, including statements regarding possible future events, constitute only subjective views and/or present intentions; are not representations or warranties; and are subject to change. Ocean Protocol Foundation’s views or intentions with respect to purchases or sales of particular tokens in the future may change. Some information may be obtained from third party sources that Ocean Protocol Foundation believes are reliable, but Ocean Protocol Foundation has not independently verified the information and cannot guarantee its accuracy or completeness. Any indices discussed are for illustrative purposes only; and have limitations when used for comparison or other purposes because they may have different volatility or other material characteristics. Any opinions expressed in Ocean Protocol Foundation communications may change without prior notice. Ocean Protocol Foundation may or may not own tokens discussed. Ocean Protocol Foundation does not provide tax, legal or accounting advice and you should consult your own tax, legal and accounting advisors before engaging in any transaction. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact and may be “forward looking statements.” Forward looking statements are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements may be identified through the use of words such as “expects”, “will”, “anticipates”, “estimates”, “believes”, or by statements indicating that certain actions “may”, “could”, or “might” occur.
