Encouraging early adoption is always a hurdle when launching a new technology – especially one that is trying to crack a problem that has been around for decades. ShoCard, which is creating a blockchain-based ID management solution, is using tokenization to help meet that challenge. The company begins its ICO on May 28, and hopes that the launch of its ShoCoin token will provide an incentive for people to use its secure identification app.
Personal identity information has value. If it didn’t, why would cybercriminals try so hard to steal it? Until now, centralized sites storing that data didn’t reward people for handing it over. ShoCard CEO Armin Ebrahimi wants to change all that with a token-based system that allows people to compensate each other for what they share.
Using ShoCard’s mobile app, people encrypt their identity information and share it with third parties ranging from banks to airlines and even their local bartender. A digital hash of that information stored on the blockchain proves that it is legitimate. The system enables individuals to keep hold of their data rather than leaving it in someone else’s potentially insecure database.
Stakeholders in the ShoCoin ecosystem can reward each other for a range of tasks including creating user identities, certifying users, and sharing those certifications.
Some of those tasks are less obvious than others. A bank running a know-your-client (KYC) check on a potential customer may have to go through an expensive internal KYC process. It traditionally has had no way to recover that cost.
A second bank signing that user up for a credit card would traditionally have to repeat that KYC check. Using ShoCoin, the bank could instead pay the first bank a small fee to prove the user’s identity. That reduces the cost for both banks and accelerates the process for the user. The banks can also acknowledge the user by paying them a small fee in ShoCoin for the information.
ShoCard will retain just over 60 percent of the total ShoCoin produced, using a little under half that amount for operations. Others go to its advisors and ecosystem partners, with some more covering the ICO expenses. It will offer the remaining 10% to the community in its ICO selling tokens at 11 cents apiece. Along with the 10% in an earlier presale, it hopes to make $20m in revenues.
Half of the funds raised will go to R&D and operations, with another 45% used for business development and marketing.
Ebrahimi says that the company is already ahead of many others at the ICO stage. “A lot of ICOs raise the money, and then there’s a big pause while they build the product,” he says. “We are in the fortunate position that we don’t have to build it.”
The company, which is now three years old, had already created its proof of concept before even hiring its initial team, and demonstrated it at TechCrunch Disrupt in May 2015. That helped it to raise its first $1.5m in seed funding from Morado Ventures, Cloud Ventures, DCG & Enspire Capital two months later.
In fact, ShoCoin is using its product for the presale and larger ICO. Other decentralized app companies have also asked it to develop an entire KYC solution for them based on ShoCard’s core technology to help them manage SEC requirements.
That’s a significant market to serve, Ebrahimi says. “A lot of existing solutions out there want an email and a phone number,” he says. That approach may come back to bite them later, given the SEC’s increasing scrutiny of ICOs.
The SEC requirements are one reason why ShoCard has been cautious in its ICO approach, he says. The company wanted to ensure that it understood the SEC’s requirements and complied with them. As the market floods with ICOs, many waving a white paper and a promise, that that’ll be something investors appreciate.