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How big is the baby dwarf? I doubt they are babies, dwarf babies are very small. 20 gallon is best long term, and it would be best to keep in one home for the duration of his life.
Dwarfs are nocturnal, so you will probably rarely see your octo unless you use red lights all the time. Temperature depends on species, but if it is a dwarf offered in the US it is likely O. Mercatoris or O. Joubini. Both are from FL and need tropical temperatures. Algae is fine, but I would check water parameters if you have hair algae. You either have too high of a phosphate level or sub par cleaning crew.
Water quality needs to be up to reef standards. Drip acclimation is best for about an hour.
Octopuses are not recommended for the beginning aquarist. They are tough to take care of and can be boring (especially dwarfs). Cephalopods are very interesting pets but nothing can be kept with them so when they are out of sight it can be boring.
tonmo.com may have more answers for you.
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