Recently a lot of CT’s attention pivoted towards Octopus Network.
Here it is an article for who wants to dive a little further and find out the potential of this network and its token $OCT.
Whitepaper overview
Appchains
Octopus Network is a multichain network born to bootstrap and run appchains, by providing them of security, interoperability and infrastructure.
The choice of building around appchains is driven by their advantages over smart contract platforms built on general purpose blockchains, those advantages can be summarized in:
A transaction processing capacity dedicated to the appchain, instead of the shared bandwith of dApps. Thus, garanting an higher scalability to appchains.
Customizability of application specific chains (appchains) over dApps. A smart contract platform is bound to the design decisions that has been made regarding the underlying blockchain, while having your own blockchain lets you customize it as decentralized governance wish.
Frameworks such as Substrate or Cosmos SDK now have decreased significantly the development time and cost of appchains, however, the capital needed to bootstrap and expecially secure appchains is still quite big.
Octopus Network aims to solve this issue.
Why Octopus Network?
Once understood what are the upsides of appchains, one might ask ‘why should i pick Octopus over Polkadot or Cosmos?’, well there are different advantages:
Enter the network is much easier and cheaper
Each parachain on Polkadot has to go through an auction, and since the number of parachains is limited, the capital needed to win the auction and enter the ecosystem is quite a lot (hundreds of millions of dollars or even more).
More than that, the security on Polkadot is shared, meaning that protocols winning an auction with billion of dollars, will get the same security level of protocols that won an auction bidding far less.Billions of dollars of security is definetly far more than what a lot of dApps need, thus, sentencing them into a cycle of hyperinflation for rewarding the users that bonded their DOT for the auction, while leaving behind the participants that bring actual value to the network.
Each appchain on Cosmos has to be secured by its own token, thus undermining new appchains with a not established token yet, that will struggle to find validators willing to be exposed to their token.
The security of each appchain on the Octopus Network is given by $OCT holders that acting as validators/delegators will be rewarded with the token of the appchain.
The security on Octopus is a free market, where each appchain is able to decide how much worth of security it needs, and act accordingly.
This means that an appchain, with, for example, 50 million of TVL can choose a level of security of 100 million dollars, thus, making not worth it to attack the appchain and exploit the TVL.
Disconnect
Each appchain can decide to disconnect from Octopus at anytime and become independent or join another network, making the decision to join the network not binding forever.
Interoperability
Because of the nature of the Octopus Relay (a set of smart contracts on the Near blockchain), the network achieves interoperability among appchains and:
The Near protocol (Aurora included) via Octopus Bridge
Ethereum network via Rainbow Bridge
IBC blockchains thanks to an out-of-box IBC Pallet
Forkability
The community of each appchain will be able to fork the appchain in case of an hostile takeover in an easy way.
Infrastructure
Octopus Network will help devs, providing a complete set of infrastructures such as an API Gateway, a Blockchain explorer, an Archive Gateway, a NEP141 wrapper contract on Near for each appchain native token, etc.
Leased PoS (LPoS)
The blockchain consensus previously described is called Leased Proof of Stake.
Because security is leased, each appchain can decide how much security they need at any given time by providing incentives. (If an appchain needs 50 million $ of security, then they will provide incentives accordingly).
Unlike Polkadot, the Octopus network doesn’t have to secure the relay chain by itself, so being a validator for appchains or a delegator is the only way to generate yield over your $OCT, thus, making smaller APY more appealing.
So $OCT token is issued and managed by a smart contract on the relay chain, and since the relay chain is on Near, it’s Near’s business to secure it, thus, setting the inflation rate of $OCT to 0.
The APY on the leased security will be paid to the validators in the native token of the appchain.
Fraud proofs
In the Octopus Network if validators act maliciously in the appchain consensus process, everyone can submit a fraud proof to the Octopus Relay.
There are two types of malicious actions that can be challenged:
A group of appchain Validators signed two different headers at the same time
A group of appchain Validators voted on a block that included invalid transactions
The first type of action can be verified by the Octopus Relay directly, and the validator will be slashed.
The second type of action however can’t yet be verified on-chain, meaning that once a fraud-proof of this type is received, the Octopus Relay will stop staking/delegation operation and any cross-chain transfer into and out of the appchain as well, then a governance decision will be taken.
Appchain pipeline
Any Substrate-based chain can register to become an Octopus appchain.
The registration requires a whitepaper and a small $OCT deposit to prevent abuse.
Once a project is succesfully registered, it will go through an audit stage, performed by the Octopus community task force.
If no vulnerabilities are found, the project moves to the voting stage, where $OCT holders can upvote or downvote.
In a period that goes from one to two week, the first appchain in queue (calculated by upvotes minus downvotes) will enter the staging stage.
In the staging stage $OCT holders can delegate or stake to secure the appchain, and if enough staking is attracted (more than a minimum security bottom line) the appchain will join the booting stage.
In the final stage, the booting stage, members of the community task force will run four nodes to bootstrap the appchain, then validators will run their nodes to join the consensus. The appchain is live.
The first 100 appchains will be rewarded with 100k $OCT linearly vested over 3 years, and more than that, the founder appchains (first 10 appchains) will get an additional 100k $OCT.
Token economics
$OCT is the native token of Octopus Network, it is heavily utility driven and non-inflationary with an hard cap of 100m tokens.
The three utilities of $OCT are:
being used as a collateral to guarantee the security of the appchains
the core role of $OCT is being used as a collateral to secure each appchain.
Holders put their $OCT at risk (via staking) to provide security to an appchain and will earn rewards in the token of the respective appchain.
It’s estimated that when Octopus will run at its maximum capacity, 30 to 50 appchain will launch every year, each of them creating demand for $OCT.
being used for the governance of the network
a second function for $OCT is to entitle holders to control the governance of the network by forming the Octopus DAO
being used to endorse appchains by upvoting them in the candidate queue
the third function for $OCT is giving to the holders the power to select which appchain will go live by upvoting or downvoting the appchains in the queue.
$OCT distribution
All the 100m $OCT tokens will be minted before the mainnet goes live (so they have already been minted).
30% of them (30m) will go into circulation right after, including tokens belonging to IDO, Seed and Series A investors.
5% $OCT belonging to the foundation will be used to provide initial security to the first appchains.
65% of the supply, including tokens belonging to the core team, angel investors, the foundation and the strategic investor (NEAR foundation), will be released linearly over 3 years.
The Octopus Accelerator Program
One of the biggest issue that the Octopus Network has to face is how to find and attract appchains.
Blockchain is still a small branch of the industry and a lot of the devs are specialized in Solidity.
An important step is to transform web devs and Solidity smart contracts devs into Substrate devs, and in doing so the Octopus team is very experienced.
Three years ago the Octopus team along with community enthusiasts initiated the first global Substrate online training course, training the first batch of Substrate devs in China.
The course now is funded by Parity, Inc.
To date many of the members of the Octopus team have served as teaching assistants for the course.
An expansion of the course beyond China is currently under discussion with partners worldwide, including the NEAR education team.
But Web3.0 applications are not only about technology, because of this, the Octopus team aims to launch an Octopus Accelerator Program to prepare the devs with a comprehensive knowledge about Web3.0 applications.
From now on personal opinions, NFA
Upsides
token economics
The token economics of the project is outstanding.
It combines a non-inflationary token with a possibly unlimited demand and significant use cases.
More than being used for governance and voting appchains, $OCT will be the token needed by all the appchains in the network for security, and since there is a potentially unlimited number of appchains, the demand for $OCT will potentially increase over time.
Successfull appchains will need an increasing worth of collateral as their TVL increases, driving the demand for $OCT even higher.
And i have probably already said that but the key here is the non-inflationaty nature of $OCT.
The relay chain will be handled by NEAR, meaning that there’s no need for Octopus to pay $OCT for securing itself since the only thing it has to worry about is securing its appchains.
A non-inflationary token with a potentially never ending increase of demand might be a very good play in case of a succesfull product.
And also important is that a very expensive $OCT won’t be a problem for the appchains since what matters is the worth of collateral and not the quantity of it.
Interoperability
Another big upside in my opinion is its connection with basically everything.
I think it’s pretty clear right now that the future of the crypto space will be multi-chain, and in a multi-chain environment being able to connect with as much chains as possible will be (and still is) a top tier ability.
‘Any asset issued on Ethereum, NEAR, or any IBC enabled blockchain can be transferred into and utilized by Octopus appchains trustlessly’
and the other way around.
Take it as you wish.
accessibility
As Z outlined in his Q1, devs joining the space from web2 tech companies can really make a big difference, and being able to help them out and provide them with tools to make their overall experience easier, will probably point them to a chain or to another.
Accessibility from the dev side is an important point for the Octopus team (as well as for the NEAR foundation), in fact providing appchains devs with many useful tools and courses (as they aim to do) will make a big difference in my opinion.
undervaluation
Another big upside of the project and the token $OCT is the understimation.
$OCT atm is sitting at a FDV of roughly 450m (so around 200m of market cap) with appchains actively in the queue for deployment.
Polkadot reached more than 50 billions of valuation without any product but the relay chain.
Not much more to say.
connection with NEAR foundation
Another importan thing in my opinion is the connection to the NEAR foundation.
The NEAR foundation invested in the project in the early stages acquiring 5% of the supply, not much to worry about, instead it shows interest towards the project.
NEAR is about to launch an 800m ecosystem fund that will bring a lot of attention to NEAR and Octopus as well.
Downsides
only one thing that will be eventually fixed accordingly to the whitepaper
Second type of fraud-proof and procedure
The second type of fraud proof, regarding validators voting a block that includes invalid transactions, is not verifiable on chain YET.
The procedure is basically shutting off the appchain for a while and in my opinion this might be a very bad situation on the users side (for example, a trading appchain, the network goes down, a user needs to increase his/her margin position to not get liquidated but he/she can’t bring funds on the appchain cause it’s temporarily blocked. He/she gets liquidated).
The example above is just stupid but there are plenty of situtations that could negatively affect the users of a chain temporarily shutted off.
On the other side they are planning to solve this and bring the whole procedure on-chain so in my opinion there’s no much to worry about because we are still in the early days of Octopus.
Conclusion
This was an overview on the whitepaper and a bunch of my opinions.
NFA and i think i gotta also write that i have a bag for full disclosure (?)
The value accrual of $OCT will be tremendous if the project will shine.
In my opinion the token is undervalued considering what price $DOT reached without a product, but once it will gain its fair share of market cap, it will be however a very good coin to invest in for the long term considering its non-inflationary nature and its potentially unlimited increase of demand.
- erlalons