Civic whitepaper summary

Please note that this summary may be updated from time to time and is only intended to provide a high-level overview of the ecosystem. Please consult the final Civic Whitepaper upon release for a more complete discussion.

Introduction Blockchain technology offers a compelling solution to the challenge of making it easier to verify Personally Identifiable Information (“​PII​”) while simultaneously protecting the privacy and security of such information. The blockchain allows for the recordation of “​attestations​” by entities that have verified particular elements of an individual’s PII. Such attestations consist of hashes of the underlying elements of PII and certain metadata relating to those hashed PII elements. A second entity wishing to verify the same PII from the same individual can then rely upon the first entity’s attestation regarding the PII, all without having to expose or jeopardize the security of the underlying PII. The following discussion explains how Civic intends to create an ecosystem built around this innovative technology, and its existing identity verification (“​IDV​”) product, to make IDV faster and less expensive.

Civic’s Core Value Proposition Civic’s model ​is designed to allow for on-demand, secure, and lower cost access to IDV-related services by exploiting the blockchain and related technologies. Civic intends to eliminate the need for background and IDV checks relating to a specific individual to be undertaken from the ground up each time a new institution or service requires the same checks.

Civic currently offers an IDV product that is available worldwide. Building on this record of innovation, and in line with our vision of creating a truly decentralized identity ecosystem for IDV, we now intend to launch a utility token known as the Civic Token or “​CVC​.”

Civic’s innovative new ecosystem will be designed to incentivize participation by trustworthy IDV providers known as “​Validators​,” who may include financial institutions, government entities, and utility companies, among others. Validators will be able to verify the identity of an individual or business, known as a “​User​,” and ‘stamp’ or record this approval on the blockchain in the form of an attestation. Parties known as “​Service Providers​” who are seeking to verify the same information about a given User, and who may include other Validators, would no longer need to independently verify that information and could instead leverage the work already performed by trusted Validators.

Civic intends for this kind of robust and decentralized IDV ecosystem to emerge through the use of smart contracts, which will ideally be built on Rootstock1 (“​RSK​”). The smart contracts will enable Validators to offer their attestations for sale to Service Providers (subject to obtaining the User’s approval), and Service Providers to determine which Validators are offering attestations and at what price. The smart contracts will also ensure that Users remain in complete control over their PII, by requiring the User’s consent before the IDV transaction between the Validator and the Service Provider can be completed.

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Subject to the availability of all necessary features on the Rootstock platform.

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Once the Validator, Service Provider and User all sign-off on the transaction, the Service Provider will pay the Validator in CVC. The smart contract will allocate a set portion of the paid CVC to the User to incentivize User participation in the ecosystem. Users will be able to use their CVC to purchase identity-related services from Civic, including some or all of the services currently available. Civic envisions that other service providers will also make their identity-related products and services available through the ecosystem, and that Users will use their CVC to utilize those third-party offerings as well.

In addition to the RSK smart contracts, the Civic ecosystem will also include Civic’s existing app (through which Users will share their PII with chosen Validators and consent to transactions by interacting with the smart contracts), and software to be developed by Civic through which Validators and Service Providers will themselves be able to interact with the smart contracts.

While Civic will develop the initial smart contracts and software that will be available at launch, the ecosystem will be open to third-party providers.

Allowing entities to sell their attestations but ​not ​the underlying data, would turn the IDV market on its head. Entities who have invested heavily in IDV and Know Your Customer (or “​KYC​”) processes and built large, verified User bases would be able to transform their once costly activities (i.e., customer IDV and KYC) into revenue generators, all without selling or transferring any customer PII. Through this design, Civic aims to address the needs of: ● Service Providers, by lowering their costs of verifying the identity of an individual or entity from scratch. ● Validators, by enabling them to recoup the costs of the identity verifications they perform and the attestations they provide. ● Users, by granting them rights to view or amend, and control who has access to, their data directly. The CVC that Users receive for participation will be reusable within the Civic ecosystem to obtain other identity-related services from Civic or ecosystem participants. ● Governments, by allowing departments or agencies to rely upon each other’s attestations of identity with the express consent of a User.

As designed, Civic’s new ecosystem is expected to reduce the overall costs and burden of IDV-related diligence, including KYC checks, while simultaneously enhancing security and privacy, thereby improving the user experience and disrupting the current market for such services.

Market Context The trend towards more extensive collection of personal information has become very prominent in the US recently, and has broadly been followed in almost every country. As a result of this global trend, the overall IDV sector is large and growing. This is in the context of a sharp rise in security breaches and data theft. ● In 2016, 15.4 million adults in the United States were victims of identity fraud, 16% higher than in 2015. Victims suffered losses amounting to $16 billion, almost one billion dollars more than 2015.2 2

​http://javelinstrategy.com/press-release/identity-fraud-hits-record-high-154-million-us-victims-2016-16-percent-according-new

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● Globally, almost 1.1 billion identities were stolen in 2016, or nearly double the amount stolen in 2015.3 Key issues in the IDV market that make it the perfect target for disruption include: ● The costs of data acquisition: the cost for financial institutions of on-boarding a single customer with full KYC diligence starts at approximately $15-20, despite the fact that the KYC process is very similar (if not identical) for most organizations, and is typically repeated every time a customer seeks to access a new product or service (e.g., opens another account or applies for a loan). ● Cultural factors: the trend to switch careers more often, as well as higher “churn” in consumer markets, makes individuals more likely to switch banks, credit card companies, or utility providers as new or more cost-efficient options become available. ● Privacy: privacy concerns arise whenever PII is stored. These concerns are heightened in light of the many high-profile hacks, leaks and thefts of PII in recent years, as well as regulatory and legal developments in many key jurisdictions around the world.

The IDV industry has developed in response to this changing cultural and regulatory landscape concerning personal data, and there are a number of service providers now offering easy API access to multiple sources of consumer data for IDV. However, ​in many cases, companies are paying high fees to verify the identity of an individual who may already have been verified just hours ago by the same underlying third party provider (e.g., a credit reporting agency), but for a different company.

A transformative solution would allow parties to easily prove that IDV information related to a particular individual has been authenticated by a trusted institution without those parties having to share any of that individual’s PII between them, hence maintaining the individual's privacy.

Ideally, the institution that paid a substantial cost to perform the initial verification would be compensated with a small fee for providing this proof, thereby incentivizing both institutions to participate. ​This lowers the overall cost of IDV, thereby disrupting the entire IDV supply chain.

Civic Token CVC is intended to act as a form of settlement between Validators and Service Providers within the ecosystem, facilitating the reuse of previously attested data. CVC will also provide a means to incentivize all participants, including Users, to contribute to the ecosystem. Moreover, Civic anticipates that the ecosystem will develop such that Civic and third-party providers of identity related products and services will utilize the platform to offer those products and services to ecosystem participants (depending on their nature and use) in exchange for CVC. Rapid growth of the Civic ecosystem in the early period after launch is desirable to build network effect and to attract additional ecosystem participants. Civic will set aside approximately 33% of all CVC tokens created in order to incentivize adoption. Certain early adopters who implement Civic as an IDV solution and Users who sign up may receive free tokens, enabling them both to pay some fees in CVC and to benefit from network effects brought about by greater adoption.

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An estimated 563.8 million identities were stolen in 2015. ​See https://digitalhubshare.symantec.com/content/dam/Atlantis/campaigns-and-launches/FY17/Threat%20Protection/ISTR22_Main-FINAL-APR24.pdf ?aid=elq_&om_sem_kw=elq_17985977&om_ext_cid=biz_email_elq_

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