Sphre ( XID ) Investment Analysis

Overview SPHRE is a decentralize identity smart contract for identity management, verification, monetization, online security and privacy .

Sphre is an information technology firm focused on blockchain projects. Sphre is pursuing the development of more secure online services by applying new insights and developments in application design and methodology. Sphre’s project pipeline is centered around improving upon the legacy systems that are overdue for an overhaul.

Introduction

Currently, there is a digital identity management system ‘race’ raging with both public and private organizations actively seeking a viable solution to the issue of online security for individuals. There are many challenges in this race; the majority are due to the fragmented nature of the various solutions thus far implemented by numerous organizations and enterprises. This has resulted in a poor and confusing user experience via the necessity to maintain multiple service registrations, logins, usernames and passwords, to largely differing service provider security policies. The centralized nature of identity providers such as Facebook are of great value to malevolent actors based on constantly evolving attack vectors, and therefore centralized solutions will become increasingly untenable as we continue to evolve with, and transact more of our lives via the Internet.

Public/Private key cryptography and decentralized technologies such as blockchain offer a potential solution for the challenges previously noted. These technologies revert the ownership of a given digital identity from centralized Internet services such as Facebook to the individual, so that the individual is in control. This approach decentralizes data and computing capacity, thereby greatly decreasing potential security exploit attack vectors, and further rendering potential threats void due to the increased technical complexity required for exploitation.

The introduction of new technologies to individuals and enterprises is challenging. Cryptographic tools such as Pretty Good Privacy (PGP) have been available for circa 25 years, however their use in digital identity systems has been largely ignored due to this technologies non-intuitive and complex user experience. Blockchain technologies mandate the use of cryptographic keys to digitally sign messages for each interaction. The increasing use of cryptocurrencies such as Bitcoin, and generalized blockchain based architectures such as Hyperledger have exponentially increased interest in making Public key cryptography accessible to individuals and enterprises in a greatly simplified approach than was previously possible.

Interacting with blockchain-based platforms necessitates the use of Public key cryptography.

Blockchain technology itself can assist to make Public key cryptography more useable and secure by acting as a fully decentralized Public Key Infrastructure (PKI). Thus, the blockchain platform can be thought of as a decentralized Certificate Authority (CA) that can maintain the correlation of a given digital identity to an individual’s Public key. The further implementation of blockchain-based Chaincode (more generically known as a Smart Contract) can further add program logic that assists with key revocation and recovery, thereby further decreasing technical requirements for the individual.

THE AIR PLATFORM DIGITAL IDENTITY AND THE ATTENTION ECONOMY

For the individual, as the Internet has continued to evolve, several differing paradigms have emerged to target individuals with advertising content, with no compensation provided for the individual for their attention, and possible further interaction with the given advertisement or vendor. The term “Attention Economy” has been described as the following: “Attention is focused mental engagement on a particular item of information. Items come into our awareness, we attend to a particular item, and then we decide whether to act.”

The current system requires individuals to share their identity data with a myriad of companies and corporations for free, and in many cases this data is commercially exploited. It is our intention to disrupt this paradigm by placing value on an individual’s identity. Therefore, and in a novel addition to the described digital identity solution, a system of cryptocurrency based micro-payments (via a distinctly issued digital currency token, that can then be used to purchase or receive discounts on existing vendor services), will be made to a given individual upon a successful interaction using the Air platform being confirmed as having taken place, via the blockchain transaction record. The individual will then receive a targeted advertisement, based on their stated areas of interest.

The above noted functionality is expected to not only increase the individual’s attention to targeted advertising, but to enable the individual to increase their financial viability, to thereby increase their engagement with the digital economy as a positive reinforcement

WHAT IS AIR, AND WHY IT CAN WIN THE ‘RACE’?

permissionless/permissioned (hybrid) blockchain. The baseline technology of Air is composed of three major components: Chaincode (also known more generically as a Smart Contract), Application Programming Interface (API) and a mobile/cellphone application (initially for Apple iOS/Google Android, with other platforms to follow on an incremental basis) for individual use.
The API will allow third-party organizations and enterprises to integrate support for Air into their existing and new systems.

The Mobile application can secure and maintain an individual’s Private key. The individual can also store the provided key within a Digital Vault of their choice, such as their bank.

The Hyperledger Chaincode forms the basis of the given identity and contains program logic that will allow an individual to recover their identity if their mobile device is lost. It is expected that Air-based digital identities will take a variety of forms, such as individual, enterprises, organizations or devices. These identities will be fully owned and controlled by the creator, and will not rely on any centralized third party for validation. A further advantage of an Air-based digital identity is that due to its blockchain-based implementation, that digital bearer’s assets — such as cryptocurrencies or other tokenized assets — are also intrinsically supported.

At its core, an Air-based digital identity facilitates the ability to digitally sign and verify an action or transaction, thereby enabling a variety of potential use cases.

THE POTENTIAL MARKET

The digital identity market is estimated to grow from EUR 8.43 Billion (USD 8.09 Billion) in 2016 to EUR 14.13 Billion (USD 14.82 Billion) by 2021, at a Compound Annual Growth Rate (CAGR) of 12.9% between 2016 and 2021. Major growth drivers of the market are rise in awareness about compliance
management across various industries, increase in security concerns among organizations and individuals, and demand for mobility solutions .

THE AIR PLATFORM USE CASE EXAMPLES

There are many potential use cases for Air, as It is expected that Air-based digital identities will take a variety of forms, such as individual, enterprises, organizations or devices. However please consider the following initial use case examples:

USE CASE 1 I am an end-consumer, using a cell/mobile phone, tablet or Personal Computer (PC), and I want to buy an item from a popular online retailer. I select the item from the retailer’s website; I confirm that I want to “pay” for the item; the Air platform is engaged in the background; my identity is checked and confirmed, and the transfer of funds is made directly from my bank. My order is then successfully concluded in the usual manner (logistics etc.) without the need for a password (or other form of authorization).


USE CASE 2 I am a consumer of medical services, and want to share my patient record with a third-party insurer, I can authorize this engagement via direct identity authorization in a single transactional step, with the records shared simply and efficiently.


USE CASE 3 For the end-consumer application, for each transaction that I will complete successfully leveraging the Air product for Identity Management, I will receive a micropayment, and a targeted advertisement based on my selected content of interest, as previously stated.

SUPPORTED CAPABILITIES AND TRANSACTIONS

The Air Platform supports the following capabilities/transaction types to support all participants within the Air Platform network:

• Identity authentication/authorization and attestation:
• The ability for an individual or organization to complete operations related to identity authentication* and authorization,
• including the ability to attest (or receive an attestation) to another individual or organizations identity.
• The ability to receive a micropayment reward for successfully completing this transaction type.
• The ability to monetize personal/organizational data:
• The ability to sell personal/organizational data to data analytic providers for their analytical and research purposes.
• The ability to receive payments for the sharing of such data.
• The ability for content providers to directly target individuals/organizations (based on their stated interests):
• The ability for content providers to directly send content to Air Platform users, where the content to be provided is aligned with an individual’s/organization stated interests.

THE XID TOKEN

The XID token, at its highest level is the ‘fuel’ of the Air Platform network. It is required to build, scale and enable the Air digital identity platform. From a user perspective, for each identity based transaction that is performed, the user will receive an XID micropayment reward (minus all transaction charges required to operate the Air Platform). In return, users will receive a short, targeted piece of content (based on the user’s stated preferences). XID is the incentive mechanism by which users of the Air Platform can be rewarded.

Trend Analysis

The statistic below shows estimates for the annual aggregate revenue of the U.S. advertising and related services industry between 2004 and 2015. In 2015, it generated an estimated revenue of 95.35 billion U.S. dollars. and exported 76.44 billion U.S. dollars in expenses. Ad agencies only contributed nearly a half (40 billion) of the industry’s revenue, whereas media buying agencies generated some 7.5 billion U.S. dollars.

Estimated aggregate revenue of the U.S. advertising, public relations, and related service industry from 2004 to 2015 (in billion U.S. dollars)

Conclusion

Digital advertising, publishing and user acquisition are all categories which Sphre intends to embark on, all within the world of decentralization.
Taking on the unenviable responsibility of become a digital advertising company while in the process attempting to properly market their own offering to gain mass market adoption.

Let’s put aside the technology, because quite frankly it is nothing spectacular, they plan on using Hyperledger as their backbone architecture.
What I think Sphre severely lacks is the how, and not in the how they plan on building their first prototype but in how they plan on gaining mass market adoption when they are not first to the market.

We just completed a huge hype train in this similar genre also known as, Basic Attention Token and the Brave browser. As a result, we are not in unchartered territory when it comes to the Sphre offering.
Sphre is proposing to become the “advertiser” network by recruiting and enlisting advertiser to join Sphre, however it is uncertain how they intend to do this? And then after they have attracted the advertisers to then serve up ads to users based on the profiles and interests and if these users want the so-called ads in the first place. But again, we are putting the cart before the horse, because we are unsure how Sphre intends to attract and most importantly retain users. In the diagram above is an example of a traditional advertising model.

What Sphre proposes this “new” model: User interacting with Advertising and Publisher via criteria, rules, preferences, consent.
Sphre does have a couple of interesting features: biometrics and attestation and its third-party API.

What Sphre proposes is interesting but what is most interesting is how they plan on capturing the advertisers and user market share to make this project a success? Mass user/advertiser adoption is critical to the success of this project.

This new model is Sphre will serve as the advertiser and publisher serving ads to the user and incentivizing both parties