Ocean Protocol: Tokenised Alternative Data to Enrich Investment Decisions

The days when traders, investors, and fund managers relied only on the data supplied directly from financial markets, such as prices and trading volumes, are over. Modern quantitative trading models and investment decision-making frameworks require a host of alternative data sources to achieve alpha. One kind of such data is social media sentiment for financial assets. This is the data type we, at ZENPULSAR, are pioneering in the market. Other highly useful alternative sources are based on surveys, supply chain statistics, e-commerce data, energy consumption data, and more. Ocean Protocol (OCEAN) is an Ethereum-based decentralised app that facilitates trade in tokenised data collected from a wide variety of sources. In this article, we are taking a closer look at this unique platform.

Investment Decision-Making Today

The ultra-competitive nature of modern financial markets has long rendered models and analysis based only on price and volume obsolete. To achieve alpha and get ahead of competitors, hedge funds and quantitatively-minded investors started to enrich their trading models with a variety of fundamental market data, such as earnings report indicators, debt levels, and revenue trends.

This has now been followed by the inclusion of alternative data as well. A major source of alternative data - finance-specific social sentiment - is a must-have for robust analysis and forecasting models used in today’s markets. The quest for further alpha is now driving hedge funds and other investors to explore further sources of alternative data to enhance their models. This includes the results of investor and consumer surveys, measurements from supply chain systems, e-commerce data, energy usage rates, and more.

The key problems with the inclusion of all this potpourri of data relate to the lack of standardisation, poor availability, and, quite often, the cost of access. Ocean Protocol (OCEAN) is an Ethereum-based decentralised app that tackles these problems head on. The protocol facilitates a trade in tokenised data. Any kind of structured data, including surveys and measurements from different industry sectors, can be tokenised on the protocol to enable easy access to it.

How Does Ocean Protocol Work?

Tokenising and trading data is a straightforward process on Ocean Protocol. To demonstrate it, we will use the example of a survey dataset that you might consider making available on the platform.

Here's how it works:

1. Tokenisation. You begin by tokenising the survey dataset. This involves creating data tokens that represent access rights to the dataset. Each token corresponds to a specific unit of data, which can be a portion of the dataset, an individual survey response, a subset of responses, or any other predefined data segment.

2. Pricing. You set a price for each data token, indicating how much users will need to pay to access a specific piece of the dataset. For instance, you might charge 1 OCEAN token to access a single survey response.

3. Publishing. You publish the tokenised dataset on Ocean Protocol, specifying the terms and conditions for access. These terms could include pricing, licensing, and any specific rules for data usage.

4. Data consumers. Users who are interested in your survey data can search for it on Ocean Protocol. When they find the dataset, they can view the pricing and terms you've set. One example of a potential user could be a hedge fund or investor looking to enrich their internal model with the survey data.

5. Purchase. A data consumer decides to purchase access to a particular segment of the dataset. They pay the required number of OCEAN tokens to access that data.

6. Access. Upon successful payment, the data consumer receives the data token, which grants them access to the chosen data segment. You, as the data provider, receive compensation in OCEAN tokens for sharing your data.

What Benefits Does Ocean Protocol Offer?

For data suppliers, the obvious benefit is the ability to monetise access to their data. For data consumers, particularly those in the financial domain, the key benefits include:

1. The ability to access a variety of alternative data that otherwise might be hard to source. These alternative data might serve as valuable inputs into quantitative models and decision-making frameworks used by hedge funds and other quantitatively-minded investors.

2. Cost-effective access to valuable data on a per-use or per-subset basis. Very often, rare or specialised datasets have prohibitively high price tags. Ocean Protocol helps data consumers access such data in a flexible way, e.g., by simply renting instead of buying it.

3. Resolving data privacy issues. Clients can access data without the need to request personal or sensitive information from data providers. The decentralised nature of Ocean Protocol ensures that data privacy and control are maintained.

4. Data security. The use of blockchain technology in Ocean Protocol ensures secure and transparent data transactions. Data consumers can trust that they are receiving the data they paid for. The data they access is also protected using Ethereum’s cryptographic security features. Contrast it with internal storage of purchased data, which might easily be lost if there is a major security attack on your corporate IT systems.

5. Scalability and flexibility. Ocean Protocol allows data consumers to scale their access to data as needed. They can access multiple datasets, both large and small, without the need for complex negotiations or data-sharing agreements.

6. Global access. Ocean Protocol is accessible to a global community, ensuring that data consumers from different regions can tap into datasets from around the world. For instance, a hedge fund considering expanding their investment options to a new region might source the required region-specific datasets.

Ocean Protocol is the pioneer of blockchain-based alternative data trade. As alternative data grows more important for traders and investors, we expect the protocol’s use cases to grow further. The secure, flexible, and affordable format for data trade offered by Ocean Protocol has very few alternatives at the moment. As an investor or fund manager, if you are serious about enriching your models beyond the basic financial data, the platform is a must to check out. What our PUMP 2.0 platform is to social media sentiment data, Ocean Protocol is to a variety of other alternative data types.