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Issue-#1017: Add content on factor affecting price in asset pricing page

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Akshay 2022-06-20 12:30:41 +02:00 committed by Matthias Kretschmann
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content/concepts/asset-pricing.md
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@ -5,7 +5,7 @@ description: Choose the revenue model during asset publishing
Ocean Protocol offers 3 types of pricing options for asset monetization. The publisher can choose a pricing model which best suits their needs while publishing an asset. The pricing model selected cannot be changed once the asset is published.
The price of an asset is determined by the number of Ocean tokens a buyer must pay to access the asset. When users pay the right amount of Ocean tokens, they get a *datatoken* in their wallets, a tokenized representation of the access right stored on the blockchain. To read more about datatoken and data NFT click [here](/concepts/datanft-and-datatoken).
The price of an asset is determined by the number of Ocean tokens a buyer must pay to access the asset. When users pay the right amount of Ocean tokens, they get a _datatoken_ in their wallets, a tokenized representation of the access right stored on the blockchain. To read more about datatoken and data NFT click [here](/concepts/datanft-and-datatoken).
## Fixed pricing
@ -23,14 +23,14 @@ The image below shows how to set the fixed pricing of an asset in the Ocean's Ma
With the dynamic pricing model, the market defines the price with a mechanism derived from Decentralized Finance (DeFi): liquidity pools. While the publisher sets a base price for the token in OCEAN, the market will organically discover the right price for the data. This can be extremely handy when the value of the data is not known.
The Ocean Market helps create an Automated Market Maker(AMM) pool of Datatoken and Ocean tokens in dynamic pricing for each asset. *AMM* enables unstoppable, decentralized trading of assets in the liquidity pool.
The Ocean Market helps create an Automated Market Maker(AMM) pool of Datatoken and Ocean tokens in dynamic pricing for each asset. _AMM_ enables unstoppable, decentralized trading of assets in the liquidity pool.
AMM uses a constant product formula to price tokens, which states: **x * y = k**
where **x** and **y** represents the quantity of the two different tokens in the pool and **k** is a constant.
AMM uses a constant product formula to price tokens, which states: **x \* y = k**
where **x** and **y** represents the quantity of the two different tokens in the pool and **k** is a constant.
A *liquidity pool* is a reserve of tokens locked in the smart contract for market making. A buyer or a seller of an asset exchanges token **x** for token **y** or vice versa. AMM calculates the exchange ratio between the tokens based on the mathematical formula above.
A _liquidity pool_ is a reserve of tokens locked in the smart contract for market making. A buyer or a seller of an asset exchanges token **x** for token **y** or vice versa. AMM calculates the exchange ratio between the tokens based on the mathematical formula above.
Ocean Protocol facilitates the creation of Datatoken/OCEAN liquidity pool with [Balancer smart contracts](https://github.com/oceanprotocol/contracts/tree/v4main/contracts/pools/balancer). The publisher needs to only approve a blockchain transaction that creates an AMM while publishing the asset. Thus, Ocean Market hides the complexities of deploying an AMM pool.
Ocean Protocol facilitates the creation of Datatoken/OCEAN liquidity pool with [Balancer smart contracts](https://github.com/oceanprotocol/contracts/tree/v4main/contracts/pools/balancer). The publisher needs to only approve a blockchain transaction that creates an AMM while publishing the asset. Thus, Ocean Market hides the complexities of deploying an AMM pool.
While publishing an asset with dynamic pricing, the publisher decides the initial ratio of Datatokens and Ocean tokens in the pool, thus setting the initial price of an asset. The price of an asset is later dependent on the pool's liquidity and the price impact of trade in the pool.
@ -42,6 +42,26 @@ The image below shows how to set the Dynamic pricing of an asset in the Ocean's
Ocean Protocol also allows publishers to set the pricing using ocean.js and ocean.py library.
### Effect on price due to changing liquidity
#### Action: adding/removing liquidity from pool
With one-sided staking, when liquidity is added to the pool, the user's ocean tokens are added to the liquidity pool. To protect users' funds from impermanent loss due to changes in the ratio of tokens in the liquidity pool, Ocean protocol's bot mints new datatokens and adds them to the pool. Thus, when users add liquidity to the pool, the ratio of tokens remains constant, and there is no price impact on the datatoken.
Similarly, when the users remove liquidity, they get Ocean tokens in return for their address. To balance the ratio of tokens in the pool, Ocean Protocol's bot burns the datatokens. Thus, in this case, there is also no price impact on the datatoken.
#### Action: Buying datatoken
When the user buys a datatoken by paying Ocean tokens to the pool, the ratio of Ocean token and datatoken changes, there would be more Ocean tokens and fewer datatokens in the pool than previously. As there would be fewer datatokens, the pool will increase the amount of Ocean tokens required to buy a datatoken in the following transactions to maintain the constant ratio between tokens. Thus, the price of the datatoken increases whenever datatokens are bought.
#### Action: Sell datatoken
When the user sells a datatoken and gets Ocean tokens from the pool, the ratio of Ocean token and datatoken changes, and there would be fewer Ocean tokens and more datatokens in the pool than previously. As there would be more datatokens, the pool will decrease the amount of Ocean tokens required to buy a datatoken in the following transactions to maintain the constant ratio between tokens. Thus, the price of the datatoken decreases whenever datatokens are sold.
#### Action: Buy dataset
Buying a dataset requires the users to obtain the datatokens from the pool by paying Ocean tokens. This is the same as buying a datatoken from the pool. Thus, if users buy datatokens, the price of datatokens will increase. However, if users already have the datatokens, they can simply use them to buy the asset or the service without requiring interaction with the pool. In such a case, the price of the datatoken doesn't change.
## Free pricing
With the free pricing model, the buyers can access an asset without requiring them to pay for it except for the transaction fees.