Blockchain

Octopus Network (OCT) is the New Contender for the Internet of Blockchains

There’s an abundance of liquidity in diverse blockchain ecosystems, but the inability to exchange value across platforms hamstrings network effects. This is why the primary focus of Web3.0 next-generation decentralized protocols is to develop technology for cross-chain interoperability.

The road to Web3.0 is already being actively paved by Cosmos, Polkadot — and its precocious sidekick, Kusama. Cosmos and Polkadot/Kusama are premised on the inevitability of a future where multiple blockchains are able to interoperate with one another rather than existing in silos.

But did you know there is another kid on the block? The Octopus Network has stepped up to the plate as the 3rd next-generation Substrate-based cryptonetwork designed to launch and run Web3.0 application-specific blockchains — Appchains — with cross-chain interoperability.

But Octopus is different from Cosmos and Polkadot/Kusama in that it’s lowering the economic barriers of Web3.0 innovation to make launching application-specific sovereign blockchains more accessible to a broader range of innovators, developers, and use cases —  with no limits on scalability. 

How are decentralized systems trustless?

Web3.0 is an Internet reality where decentralized systems spread across multiple nodes can’t be controlled by any single authority. Middlemen, third parties, and counterparties can be blamed for economic cost, security risk, corruption, and the power to freeze and censor transactions. 

Decentralized architectures offer privacy, autonomy and are based on a strong economic system of incentives, where all the stakeholders are rewarded. Decentralized systems are trustless because the truth is ensured through a consensus of all the participants and not by a centralized body. Trust between participants is based on a consensus mechanism that ensures all participants in the system agree on the state of the chain at any given time.

What is the internet of blockchains? 

In the same way that today’s Web2.0 internet TCP/IP standards define the internet as a network of networks with a vast range of services, interoperable cryptonetworks like Cosmos, Polkadot/Kusama, and Octopus Network are often referred to as the “Internet of Blockchains” — a metaverse where decentralized cryptonetworks co-exist, exchanging value and information with each other. 

Octopus is similar to Cosmos and Polkadot in that it also aims to deliver decentralized applications for every online industry that the Web2.0 traditional middleman has heretofore controlled — and return value to the real creators — whether in DeFi, gaming, NFTs, DAO, advertising, the creators’ economy (video, audio, graphics, text), prediction markets, and more.

Trustless, autonomous blockchains that can interact with each other have the advantages of both being sovereign and benefiting from the network effects of interoperability as services become more valuable when more people can use them.

But being a trustless multichain cryptonetwork comes with its own challenges. Setting up a consensus mechanism requires nodes, aka validators, that stake monetary funds to secure the chains. And each of these three ecosystems — Polkadot/Kusama, Cosmos, and Octopus Network —  go about offering security for its sovereign chains in a different way.

Graphic Title:  Octopus sees a Web3.0 future where Polkadot, Cosmos, and Octopus offer the best of all worlds to Substrate developers.

Security in Octopus, Cosmos, and Polkadot — what’s the difference?

While Substrate has decreased both the cost and effort of building sovereign chains, security bootstrapping is still a technically complex and capital-intensive job for developers.

Cosmos connects sovereign blockchains with a Hub and Zone blueprint using the Inter-Blockchain Communication (IBC) protocol. Cosmos’ sovereign chains are called “Zones.” Cosmos Zones’ security model differs from the shared security model of Polkadot/Kusama Parachains (“parallel chains”) in that each Cosmos Zone must bootstrap its own Tendermint unique active validator set from the ground up, representing a large developer overhead for creating security.

In the shared security design of Polkadot and Kusama, developers only have one choice —  win a slot in the auction. A Parachain must be able to pay for the consensus cost of one shard of the network, which can equate to tens of millions of dollars a year. The results of Kusama’s recent 5 auction winners speak for themselves, with the winning bids ranging from $25-$96 million.

If you don’t have enough tokens to win a slot in the Parachain auction, you can accept crowdloans from investors in your project. Of course, in order to receive tokens from crowdloans, you have to provide some sort of return on investment. When Parachains have promised to issue a big chunk of native tokens to crowdloan lenders, they may expose themselves to the possibility of getting trapped in hyperinflation. 

On Polkadot, Parachain lease slot durations are a maximum of 2 years in length — made up of lease periods that are just 3 months long. On Kusama, the slot durations are roughly half as long with lease periods of 6 weeks (everything moves faster on Kusama!) When a project’s Parachain slot expires, it must win another slot at auction or be downgraded to a parathread which is a type of “pay-as-you-go” model. 

A parathread must pay a fee that is higher than the fee offered by all the other parathreads on the network for each transaction it wants to commit to the Relay chain — an auction for each block, so to speak. So, a Parachain always needs to be prepared to be able to pivot in the event it loses its bid to renew its Parachain lease.

Most projects that want to launch a Parachain or Zone are startups that may not be able to afford the bond required for a Polkadot Parachain lease or the overhead to bootstrap a unique validator set for a Cosmos Zone. 

Compared to Cosmos’ sovereign security and Polkadot’s shared security models which risk completely pricing out smaller use cases and less wealthy developers, Octopus uses a leased security design.

Why is it easier to launch on Octopus?

The Octopus Relay is a set of smart contracts running on the NEAR blockchain, aka mainchain, which implements the security leasing market for its Appchains. The Octopus Relay smart contracts deployed on NEAR use the security of NEAR blockchain. But Octopus Appchains will have their own security that they lease from Octopus Relay. To put it simply, Octopus Appchains pay rent in their native tokens to lease security from $OCT holders.

In Octopus, each Appchain gets to decide its own economic model, including how many tokens it’s willing to pay validators for security. $OCT holders decide which Appchain they’d like to stake on, creating a free market where Appchains can lease the security they need at market price any time.

In short, launching a chain on Polkadot/Kusama is expensive and out of reach for most start-ups and development teams and Cosmos offers no support to help bootstrap its Zones. The Octopus Network decreases the cost to launch an Appchain 100X — from several million dollars to less than one hundred thousand dollars. Web3.0 should be accessible to everybody, not just wealthy protocols.

Cost-effective and flexible scalability in Octopus

Octopus’s security paradigm is also more cost-effective than those of Cosmos and Polkadot. Since Octopus doesn’t have its own Relay Chain or Hub Chain, and the $OCT token is issued and managed by a smart contract, Octopus doesn’t need to pay for consensus costs directly. So, the $OCT inflation rate could be set to zero — meaning that the base interest rate of the Octopus economic system is zero.

When the base interest rate is zero, a minimum of 3%-5% APY becomes a decent annual return by comparison to a Polkadot Parachain that may have to pay out 20% or more APY to make itself attractive to crowdloan $DOT lenders (who could otherwise just stake on the Polkadot Relay for an estimated 14% annual return.)

The Octopus Network’s leased security blueprint is also far more scalable and flexible. In Polkadot, each Parachain will accommodate a certain number of validators in the pool exclusively in any given epoch. The consensus algorithm limits the total size of the pool. (That’s why the initial number of Parachains is expected to be under 100 —  with less than 10 Parachain slots available this year.)

In contrast, the architectural design of the Octopus Network — which benefits from the processing power of the NEAR Protocol —  makes it easy to host hundreds of Appchains. That being said, Appchain selection is also an important part of the Octopus protocol. $OCT holders vote on Appchain selection as it’s in their best interest to attract quality Appchains to the Octopus ecosystem.

Trustless cross-blockchain interoperability sits at the core of the Octopus Network protocol stack. Appchains can interoperate with outside blockchains by bridges on NEAR, such as with Ethereum via Rainbow Bridge, or by utilizing the out-of-box Substrate IBC pallet built by the Octopus team (previously known as Cdot) to connect with any IBC enabled blockchains directly.

Octopus Network is a brand new multichain cryptonetwork born to bootstrap and run Appchains. By providing flexible leased security, out-of-box interoperability, one-stop infrastructure, and a ready-to-be-engaged community, Octopus Network is unleashing an innovation wave on Web3.0 accessible to all appchain developers and Web3.0 teams.

Christopher Fowler

Christopher Fowler is an investment professional with 7-years of experience in financial markets. His main job is to help hedge funds with his private consultations. His specialization is cryptocurrency and FinTech start-ups. He incorporates his own approach to identify emerging macro-level trends and cryptocurrencies that would benefit from such trends. Under-covered equities allow extremely high ROI, this is where Christopher digging for hidden gems.

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Christopher Fowler

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