Some of the techniques used by the rapidly evolving decentralized finance platforms can also be applied to a completely new idea - decentralized data markets.
On September 24, 2020, it was announced that Ocean Protocol, a blockchain-based data monetization project, is teaming up with Balancer Labs to create the world's first Automated Market Maker (AMM) for data.
At the start, Ocean Protocol helped individuals and businesses unlock and monetize their data, as well as spread this information and the AI algorithms that work with it outside of those organizations that collect, accumulate and organize data. According to the founder of the project - Trent McConaghy (Trent McConaghy) - in this case, it is extremely important to have effective trading platforms. Hence the alliance with Balancer Labs.
“Many people have tried to create fully fledged data markets in the past, but they have been held back by privacy and control concerns. However, with the help of blockchain and information transformation algorithms, Ocean was able to solve them. So our goal at the current moment is to create a full-fledged data economy by bringing information buyers and sellers to specialized trading platforms. Anyone can provide information - individuals, families, small companies, cities, large organizations, and even countries."
Ocean Protocol, based on the Ethereum blockchain, creates unique data tokens, which represent the right to receive or dispose of certain information. For example, a mapped genome of a certain person or a database of Daimler self-driving car owners. This information is stored in well-protected data banks and is provided only with the corresponding token. But this is only one part of the ecosystem. The second is specialized markets in which this tokenized data can be found, evaluated and sold using the project's own token, OCEAN.
But it is difficult to evaluate information. And McConaughey came to the conclusion that the third version of the Ocean project would work best on the AMM principle, the same as in Uniswap.
Unlike the auction-based approach, AMM is able to change the price throughout the asset's life cycle. At the same time, unlike projects based on the order book, there is no need for high initial liquidity and double matches of request and offer. AMM was the reason of the explosive growth of DeFi - almost by $ 13 billion. In essence, automated market makers can be viewed as robots that are willing to buy and sell assets 24-hours a day.
The Balancer Pool functioning, according to its creators, as "a self-balancing and weighted investment portfolio, and a price sensor." Therefore, it behaves like a full-fledged index fund. That means if an asset surpasses or, conversely, does not extend its functions, then it, respectively, is sold or bought in order to keep its share of the value constant relative to the entire portfolio. Moreover, this happens in a decentralized manner and without human intervention.
Basically, this is what the Uniswap app does in relation to DeFi. However, Balancer has additional benefits. For example, using unequal volumes of tokens in the pool. This means that someone with a large number of certain tokens can offer them directly, without need to connect with Ocean's internal tokens or any other cryptocurrency.
Liquidity mining for people
McConaughey also pointed out the current trend - to actively launch various projects working for AMM. And he introduced a new term for the pool of tokens of information stored in Ocean - "initial data offering" or "IDO".
“Our community loves this term and we use it a lot within our company,” said the head of Ocean.
“Basically, this is an example of liquidity mining for people. Now, for example, if someone wants to do this business using Balancer or other similar tools, they will need assets. This works well for big whales and wealthy privateers, but it turns out to be ineffective for ordinary people due to transaction costs. But everyone has the data. Therefore, everyone can place their information on the service and find out it's price, which is determined automatically."
As for the high transaction costs associated with deploying new pools on Balancer, the partnership with Ocean has reduced them somewhat. By using the proxy template ERC-1167.
“The idea of having millions of different tokens in different pools is not viable at the moment due to the high transaction costs of the Ethereum network. Therefore, it is extremely pleasant that Balancer was able to significantly reduce the cost of creating new data pools” - said Balancer Labs CEO Fernando Martinelli, adding that:
“For someone, it costs nothing to provide various information about themselves, such as a location or a map of their genome. And this is great, because this is what prompted us that there will always be supply and demand in an efficient market for such data. This is what we will try to implement in our new version"
Published on the EXBASE based on materials from coindesk.com