What is Ontology (ONT): Will ONT take over the metaverse?
With cross-chain support and decentralised identity at its core, Ontology could be on to a good thing
- What is Decentralised Identity (DID)?
- Dual-token system
- Who uses Ontology?
- Consensus on the Ontology network
- Should I become an Ontology node?
- What is the Wing Project?
- ONT tokenomics
Ontology (ONT), which was launched by Singapore-based founder Jun Li at the tail end of 2018, is an enterprise blockchain solution built on Neo open-source blockchain protocols.
It is marketed to businesses as an Infrastructure-as-a-Service (IaaS) offering, and Ontology claims its multi-layered blockchain architecture provides high throughput and minimal transaction fees.
Despite competing in an increasingly crowded marketplace, Ontology (ONT) boasts a number of features that could give it an edge. Most notably, Ontology supports cross-chain functionality, allowing for private blockchains built on Ontology to communicate and interact with each other, including for transactional activity.
Underpinning the Ontology network is ONT, the native cryptocurrency.
In the words of the great ontologist Socrates: “Wonder is the beginning of wisdom.” So with that in mind, let’s jump in and ask ourselves, what is Ontology (ONT)? How does Ontology work? And what is Ontology coin used for?
What is Decentralised Identity (DID)?
Ontology ID is one of Ontology’s flagship protocols. It employs the power of blockchain decentralisation, allowing for user control over data authorisation and ownership confirmation.
The key to decentralised ID – DID – protocols is “zero-knowledge proof” technology, most famously used by the digital currency Zcash as a way to anonymise transactions. In basic terms, this technology proves the validity of a statement without revealing the issuer's true identity.
Through a DID application, a user’s data set is certified on-chain, but the user is in full control of its distribution. When a third party, say an e-commerce store, requests proof of age, the user can allow that verification without revealing any additional personal information. Since the e-commerce store can verify this only at the user’s request, it is not privy to any unnecessary personal data.
Sovereign control over personal data is one of today’s biggest challenges, and zero-knowledge technology is gathering more attention. Not least from the crypto giant Ethereum, whose co-founder Vitalik Buterin is known to be a major proponent.
Ontology also has a decentralised protocol called SAGA, which allows users to monetise their personal data.
As you can see from the above transaction flow chart, SAGA profits from these data exchanges by retaining a percentage of revenue for each transaction, which is perhaps a more ethical model than entering into business partnerships with data-hungry third parties.
While ONT is the primary currency on the Ontology network, there is another Ontology cryptocurrency in operation: Ontology Gas (ONG). ONT is used for staking and governance, and is the main asset traded on the exchanges, but in-app transactions are actually performed using ONG.
ONG is also used to distribute rewards to network validators. According to Oracle, “ONG keeps the network’s transaction costs predictable, providing a friendly operating environment for users and developers alike.”
Since transaction fees are paid with ONG, any user of ONT must hold some ONG in order to execute transactions.
Be warned: as certain Redditors have pointed out, buying ONT on a wallet that does not support ONG means your ONT will be stuck. This became an issue for those holding ONT in the Exodus wallet.
Who uses Ontology?
Ontology maintains a list of DApps powered by ONT on its website. There is a pretty clear theme: most if not all of the DApps listed are China-based gaming platforms.
While these use cases are underwhelming, Ontology is looking to cement partnerships in the logistics, digital assets and financial services sectors and, in a recent blog post, laid down the argument for Ontology ID’s decentralised identity technology’s applicability in the inevitable metaverse economy.
With Ontology’s extremely high throughput and minimal gas fees, these ambitions have some basis in reality, but with an ever-expanding enterprise blockchain marketplace, there will be stiff competition in the years ahead.
Consensus on the Ontology network
Ontology uses a proof-of-stake (PoS) method to secure the network – more specifically, it uses the Verifiable Byzantine Fault Tolerance consensus algorithm (VBFT). Ontology says that VBFT increases randomness in block determination, thus making it less susceptible to malicious activity.
The network consists of two node types, the consensus node and the candidate node. The former can be considered the bookkeeping nodes, being the nodes actually achieving block consensus, thus validating on-chain transactions. The latter can be thought of as the synchronisation nodes, being the nodes working to order the blocks generated by the consensus nodes.
Through this dual-node system, network security is achieved. Being a PoS consensus method, the volume of held ONT is rewarded instead of processing power. PoS is faster, more energy efficient and arguably more secure than proof-of-work (PoW).
Should I become an Ontology node?
Since PoS does not require excessive processing power, anyone may operate an Ontology node on a regular modern PC.
However, there are significant staking requirements. To operate a consensus node, a minimum of 2.2 million ONT (just over $1.52m at recent trading prices) is required, typically consisting of the node operator’s ONT and user-staked ONT.
Consensus nodes are in control of the fee-sharing ratio (ie, the value of rewards redistributed to stakers).
To become a candidate node, 10,000 ONT (slightly over $6,900) is required. Note that any nodes will be audited before being accepted. Rewards are paid out in ONG, sourced from transaction fees and a “faucet” releasing one ONG every second. Rewards are distributed 50/50 between consensus and candidate nodes.
There are some elements to rewards distribution at play to disencourage hoarding, a prevalent issue in PoS systems. Rewards are slightly reduced when a node’s stake exceeds a certain threshold, meaning that a node is encouraged to operate at a particular size.
This is a welcome addition. Hoarding is bad for a network’s security, as fewer but bigger nodes make it easier for malicious actors to corrupt the whole network.
That being said, official datasets paint a mixed picture. At time of writing, 15 consensus nodes and 104 candidate nodes are in operation. A total of 22.23% of circulting ONT is going towards securing the network. Although there are worse figures, it cannot really be said that Ontology is a highly decentralised network.
Any end user may stake their ONT to either a consensus or candidate node to receive passive income. In general, consensus nodes tend to redistribute between 80% and 90% of the node’s own stake, as well as 80% to 90% of users’ stakes, back to stakers. Candidate nodes tend to retain the majority of the node’s own stake, while redistributing 90% to 95% of users’ stakes back to stakers.
Annualised yields range between 8% and 20% for consensus nodes, but are much higher for candidate nodes. The latest statistics can be found here.
What is the Wing Project?
Ontology also has a decentralised finance (DeFi) platform called Wing. With a total asset pool of more than $158m, Ontology’s cross-chain capabilities enable creditors, borrowers and guarantors to interact across a range of DeFi products.
Wing has its own governance token, the WING, allowing holders to vote on network proposals. WING can also be staked into a liquidity pool to earn rewards.
The ONT coin had a recent trading high of $0.691 and a circulating supply of 875.249 million, making for a market capitalisation of $591.8m. At time of writing, the ONT coin is listed at number 122 on the market cap ranks.
Circulation is currently at 87.5% of the maximum supply of one billion, meaning ONT, for the moment, is an inflationary currency. A recent 24-hour trading volume of $70.19m was 0.113% of market cap.
The distribution of ONT is subject to a vesting period. For example, 28% of all ONT is reserved for partners and co-builders, unlocked over the course of a number of years. The core development team’s 15% allocation is also vested over four years, with 15% currently unlocked. The total ONT allocation rundown can be read here.
Ontology did not perform an initial coin offering (ICO). Instead, ONT was airdropped to existing users of the Neo blockchain who opted into the airdrop.
For the future, Ontology seems to be focusing on its flagship decentralised identity product, Ontology ID. Whether or not Ontology will make good on its ambitions to tap into the coming metaverse, we’ll make sure to keep you updated here at Currency.Com
There are currently 875.249 million ONT coins in circulation, against a maximum supply of one billion.
Ontology was created by the Singapore-based blockchain expert Jun L, who also founded the blockchain solutions company Onchain.
The original Ontology development team also consisted of much of Onchains’ team, but they are separate entities.
Ontology has cross-chain support, meaning that private blockchains build on the Ontology network can interact with each other, including for transactional activity.