Like all crypto projects, Civic, the pioneering blockchain-powered identity startup, needs people, lots of people, using its platform.
And, according to Civic co-founder Vinny Lingham, while the technology is all in place for the system to work, it’s this network of users that the company is still struggling to achieve. In an effort to spur this adoption, Civic announced Wednesday that it will be paying for all identity checks for users and business partners from now until the end of the year.
Well, at least, $43 million worth.
All told, Civic is allocating 333 million of its total 1 billion supply of CVC tokens, a third of which it sold for $33 million in an initial coin offering (ICO) in June 2017. The tokens will be transferred to Civic to pay for the cost of the identity checks, serving to bootstrap growth and stress-test the protocol.
“We basically said we’re going to reserve a third of the tokens to drive network effects,” Lingham told CoinDesk.
For Civic, every new user that’s had his or her identity verified on the platform makes it a little more attractive for the next company looking for an identity solution. In this way, Civic is creating incentives for more people to join.
Lingham has been thinking about the challenge of reaching critical mass since before his company conducted an ICO in 2017.
He told CoinDesk:
“Paypal got it right with the whole $10 free if you invite a friend and it nearly bankrupted the company. They managed to crack the chicken and egg problem doing it that way.”
Fortunately for Lingham, in the new world of crypto, it’s possible for a company to create their own money supply as long as the market sees future potential. So, Civic – being the only entity, currently, that provides the know-your-customer (KYC) verification within the system – will be paying itself in CVC tokens for the service.
Why now?
Civic has built up a lot of partners, companies and entrepreneurs that need to verify a user’s identity, the most well-known of which is Annheiser-Busch.
The two companies verified the identities of users at CoinDesk’s Consensus 2018 in New York City to distribute Budweiser beers from a vending machine to attendees of legal drinking age.
It also has a lot of partners in the crypto space, including ShapeShift, Hilo, 0x and the Chamber of Digital Commerce, according to its partners page, and it’s been able to enlist a lot of ICO projects who need to run KYC before selling tokens.
“We’re at the point now where the product is actually – we’ve tested it,” said Lingham. “A hundred companies have signed up to use Civic. It’s working.”
But it’s hoping that more will consider joining this year on the promise of saving a little money onboarding their customers.
And they’re preparing for that influx by investing in the future of the business.
For instance, the company also recently acquired the URL “identity.com,” the place that will eventually serve as the meeting place between companies that need KYC services and the ones that provide them. That part of the protocol hasn’t been rolled out yet, though.
Once Civic knows that its system is working with high volume, they will open up the platform to other verifiers.
When gone, sir?
So, how many identity verifications can $43 million pay for? The general average cost for identity verification is $2, Lingham said, but there’s a wide spread.
“We’re offering this for all our services, including the accredited investor test, which is like $60,” Lingham said.
So on its face, it could be feasible for the supply to max out before the year’s end. If in theory, the company ran out of all 333 million tokens before New Year’s Day, the promotion would stop early. Lingham argues, though, there’s really almost no chance this will happen.
“We don’t expect to use all the tokens in the next couple of months,” he said.
That’s because he argued, all those CVC transactions would register to the network as demand for the product. Then increased demand would drive up the price of the token, so each additional verification should cost slightly less in CVC terms.
While Lingham thinks the promotion will succeed in enticing more users, he expects to end the year with lots of tokens left in the reserve. If it came anywhere close to running out, though, the blockchain’s ability to handle all those transactions would present more of an issue.
“The bigger problem would be ethereum. It would make CryptoKitties look like a walk in the park,” Lingham said.
On Identity.com, “it’s literally just the verification you’re being charged for,” Lingham explained. Whereas, “the central identity vendors of the world, the credit bureaus, etc, they resell your information at a profit,” he argued.
If a new entrant comes into the space and offers consumers a different deal and it catches on, that’s something that could ripple out.
As Lingham put it:
“The number of big multibillion companies in this space right now, if we start putting margin pressure on them, we disrupt the whole industry.”
Image via CoinDesk archives