Great for fighting, parties and orgies

oh LOL XD

Awesome design! I had the feeling at first glance, that it could give a speed/mobility bonus underwater, using propelling water and granting "dry land" conditions to the wearer. The attack/defend on it's own is cool and all, but game wise you just have to manage some extra tentacles making attacks, OR if balanced, these cloak-tentacles might be able to be cut off (they regenerate under 24 hours rest) so they are good for a few attacks/defensive moves, if enemies use bladed attacks. I think a passive underwater mobility bonus would be awesome, but other items might do that, as well as granting water breathing, if the wearer is "from above". If the wearer is aquatic tho' then the attacking tentacles are a nice bonus.

The other thing I was missing is a cloud of tint used as a "Darkness" spell, which the wearer could use to retreat after a successful/failed assassination. That ability would go so well with this item, since it's squid themed.

The beauty of it is that if the owner wants to add to it, it's obviously possible ^^

In the Baldur's Gate/IceWind Dale games, you can collect many powerful enchanted weaponry and items, and many of them can be upgraded to a further power up'd version, or reveal a true form/power. Yes, if the GM feels generous, items can became a bit more then they previously were. And yup, the owner can add such upgrades on itself, but having it at full power raises the item's worth and rarity, so it might be harder to get/retake from a crafty foe, etc. Starting out with a strong item is sort of a little cheat. The owner of this cloak might want to play it as they have it stashed at their old home as a family heirloom maybe, that their older bro/dad left to them, so if they want to use it, they need to get it, but their old home is occupied by baddies. A little struggle, a few quests and the cloak at any power setting is theirs and well earned. Obviously they will have it when they continue the play at high level...

oh man I remember BG2 having something like that too, with a few of them. It's been a while though.

And I agree, GM giving more powers can be cool. I honestly really like making changes/upgrading weapons alongside players.